Finomena: A bad Start-up Idea

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Finomena: A bad Start-up Idea

25 Nov 2021
- admin
As B-school students, many of us dream to starting our own companies or working in the fast-paced environment of a start-up. There is much to be said about the benefits of working in such a place, including rapid growth, career development, steep learning curve, lot of responsibility and more. Much to our thrill, many case study discussions and examples share by our faculty at SOIL during various classes are about start0ups. This gives us a fair idea of what their pros and cons are and how to start one of your own, if you are so inclined.

A start-up refers to a company which operates in the first stages of business. Start-ups are usually focused on a single product or service that the founders want to bring to market. It can be founded by one or more entrepreneurs who likes or wants to develop a product or service which is different, unique or in high demand in the market. These start-up companies generally start their business with high costs and limited revenues. Many start-ups turn to others for more funding which includes family, friends, and venture capitalists. Start-ups can use seed capital to invest in research and to develop their business plans.

We have observed and found after reading many start-ups case studies during our classes, that though some companies start well in the initial stages, they can suddenly fail to compete with their competitors in the market. We surprisingly found some key reasons of start-ups failures which are as follows: –
- Ran out of cash and unable to raise new capital
- No further need for that product in market
- Got outcompeted by others
- Flawed business model
- Regulatory or legal challenges
- Pricing or cost issues
- Conflicts among owners
- Poor product
- No new innovation
- Unable to empathize with customers
- Over confidence in the team
About Finomena

My main focus today is on start-up company named ‘Finomena’ & we will discuss why this company failed as a start-up and shut down in 2017. This was a Bengaluru- based, Fintech company which was founded by graduates of IIT Delhi and Stanford and ex-employees of Meta (erstwhile Facebook), Microsoft, Boston Consulting Group and Bain Capital. The main idea behind this start-up was to provide small-ticket loans to students and young professionals to purchase or buy electronic devices and appliances. Their process of financing and paying instalments was easy and smooth and students were easily attracted to this company as they were able to purchase phones, laptops, and other electronics online.

Finomena had raised fund by seed funding and their main competitors were ZestMoney, CashCare, Capital Float, and Lendingkart, and various other alternate loans start-ups too. However, all their capital was in vain and it was a setback for all those who invested in this start-up idea. Finomena wasted too much time on providing a service which was already provided by the big financial institutions of the market. All Finomena employees lost their jobs when this company shut down in Dec 2017.

Reasons for its failure

So, to find out the reasons of this company’s failure, we read many reviews of customers, employees and investors. According to customers, Finomena was not a useful site for money wallet as credit cards were safer and cheaper. Its customer service team was unprofessional and untrained, product quality was bad, the app was full of bugs and advertisements, and their website was not fast. We also realized during our class discussions, that the management was also not that clued in to their own tech stack. Senior management were dodgy with absolutely no idea about the Fintech industry, and were supposedly narrow minded. The engineering team was incapable of doing anything apart from the basic work. The workplace was a mess and all its members slowly became disinterested and passionless.

According to one customer review, this was the “worst website with even worst customer support”. They usually took more than 95 hours to approve loan facilities and sometimes they even took more than 15 days to approve loans. Employees were not happy as while working for this company there was zero career growth and zero learning, with no company culture. From all the reviews which we read and analysed, we found that 75% of their employees were not satisfied with the company and its work and from their services provided to the customers. There were some positive reviews but most of them felt fake. And because of all these reasons this company’s success path ceased and it ended within 2 years.

Things they could have done better

They could have started a company with some unique idea, which was in demand. Even if the product was not unique, they should have focussed on trying to stand out from the competition in some manner. They could have empathized more with their target customers and tweaked their service to provide customer delight. Studying the brand further, it seems that they were quite lethargic at the time of providing good customers support service, so they should have understood the actual problems faced by customers and could have tried to provide instant support.

Their HR team should have tried to provide a better working culture to their employees. They also could have hired efficient and professional technical members to problem solve more efficiently and create a better product.

Trustability was one of the major factors for them to make it happen in the fintech sector. Competition was fierce as banks provide similar services. Pre demonetization the scenario for the start-up was different and post the whole scenario just changed. The government launched their own schemes and banks were now providing the same – there is nothing to differentiate them. When they commenced the start-up may be the idea was a revolutionary one, but the scenario totally changed post demonetisation. People trust banks more than any other third party for such services. Trustability was one of the major factors where they were lacking.

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