Will consolidation be the key to unlocking profitability of startups?

Mergers and acquisitions (M&A) in the online startup space has kicked up recently as many beleaguered startups are looking towards the exit door.

Merger and Acquisition in the startup market. Phot

In a startup environment that is increasingly coming under immense pressure due to lack of funding and profitability coming under question, consolidation seems the only way out for many startups.

Mergers and acquisitions (M&A) in the online startup space has kicked up recently as many beleaguered startups are looking towards the exit door. Those startups doing the buying on the other hand (which are a little better off) are looking at it as the best way to expand as well as eliminate competition in the market.

One of the latest startups that has signalled that it is up for grabs, is online fashion startup Jabong. Some of the ecommerce companies that are in the race to acquire it, includes Flipkart's fashion startup Myntra, Aditya Birla's Abof, Alibaba and even Snapdeal, according to an Economic Times (ET) report. The acquisition price put up by Jabong is about $250-300 million, says the report.

Just a month back, hyperlocal delivery start-up Roadrunnr acquired food ordering firm TinyOwl. It has now re-branded itself as Runnr, according to a Mint report.

While TinyOwl was struggling with its operations, Roadrunnr wasn't doing that well itself considering the high competition and less reward in the delivery services, said the report.

The decision to acquire TinyOwl was made as Roadrunnr's delivery service was highly dependent on the online food ordering startups and decided it was time to leverage this space to its advantage.

M&A's have become all too common in the startup environment in India. For instance, Myntra which is in the race to acquire Jabong, was itself acquired by Flipkart in May 2014 for Rs 2,000 crore.

Snapdeal in May 2015 acquired mobile payment wallet Freecharge for an estimated $400 million (Rs 2,400 crore), according to a leading daily report.

To get ahead of Uber in the taxi-hailing app market Ola acquired is struggling Indian competitor TaxiForSure in March 2015 for $200 million (Rs 1,200 crore).

Some of the other acquisitions among startups include, CarTrade's acquisition of CarWale, PropTiger's acquisition of Makaan, Grofers acquisition of Spoonjoy, Townrush and My Green Box, MakeMyTrip buying MyGola.

In the food delivery startup market itself Foodpanda had acquired Tastykhana and Just Eat India.

While consolidation might be an option for startups looking at fast growth and a better exit, however this has not made things better for many startups. Take for instance, Foodpanda, Grofers, Flipkart, Snapdeal are all struggling to turn in profits despite these acquisitions.

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