Nobody ever wants to fail in his or her life. Everyone desires to be more successful, but that doesn’t happen all the time.
Riddhi Mittal and Abhishek Garg established Finomena in 2015 to help Indian borrowers, particularly those with low creditworthiness, avail small loans for buying electronic devices such as laptops, smartphones, etc. One could easily borrow the amount that ranged from 3000 to 300000 Indian Rupees.
Riddhi Mittal, a Stanford University alumni, and Abhishek Garg, an IIT Delhi graduate, had met through a mutual friend. They began to conversate causally about the non-availability of small loans to most Indians with low credit scores. Eventually, they decided to solve this problem by launching a platform that would give Indian users access to small ticket loans.
The progress of Finomena was well underway. However, suddenly in December month of 2017, media outlets aired the news that Finomena has shut down its operations.
The fintech startup, unfortunately, died just after two years. But, there must be one or some reasons that caused Finomena to die. Well, after a half day research, i came to know that the following two reasons was responsible for the death of Finomena:
High cash burn
Cash burn, a term that refers to the use of money from cash reserves for meeting the expenditure requirements of a startup, generally every month. It is normal to burn cash to meet the monthly startup expenses.
However, when a startup burns more cash than needed, its reserves start to dry up. When you don’t have enough reserves to carry on your operations, you are left out with no choice other than to raise more funds.
Finomena was caught in a similar situation. The startup had no reserves left for working capital. Though the startup approached investors for funding, unfortunately, it didn’t find an investor who could show interest.
We needed working capital badly to keep going on as a result of high cash burn. However, there was no one out there to help us, said Finomena co-founder Abhishek Garg.
The second reason that caused a delay in the progress of Finomena was the high competition from rival companies like ZestMoney, Cash care, etc. Unfortunately, Fenomina didn’t have a strategy that could differentiate its services from those of its competitors.
Startup owners are advised to have as much control as possible while burning cash reserves and developing a unique differentiation strategy.