iStream may shut down for want of more funding

The fragile Indian Internet industry is about to take another blow, as Bangalore-based video service provider iStream, which was once touted by western audiences as India’s answer to Netflix and Hulu, is on the verge of a shutdown. The possible closure, however, is only the tip of the iceberg for an industry that has been plagued with a host of problems.

iStream, which was started in 2007 as a regional partner for YouTube, quickly grew to 20 million views and re-launched in December, 2011, with $5 million in funding from SAIF Partners. According to sources, however, the company has been struggling to raise another round of funding, and has started laying off some of its employees. It may shut shop or look at a major scaling down of operations.

The company did not respond to e-mail requests for a comment. iStream is also the sole independent player in the Indian video-on-demand market, which is dominated at present by Reliance, YouTube and Apple.

Apart from iStream, the fledgling e-commerce sector has been wracked with trust issues, of late, over the recent closures of Timtara and Koolkart.com.

While Timtara’s founder was arrested last month for allegedly cheating shoppers, leaving a number of vendors and customers in the lurch, Koolkart has abruptly wound up over management issues.

The last year has seen investor appetite in e-commerce dry up. In the last three years, the industry has attracted over $700 million in risk capital, according to a recent study. Only 25 per cent of the companies which raised capital, however, were able to raise a follow-on round of funding.

“It is very difficult to maintain a relationship with e-tailers. They close down quickly, leaving us without immediate legal recourse. It is an issue that needs to be sorted out to ensure continued growth,” said a vendor, who did not wish to be identified.