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🇮🇳 Indian bureaucracy destroyed this insurtech startup
How Kenko Health died due to Indian bureaucracy (an insurance license that's almost impossible to get)
Admond Lee
November 17, 2024
Hey Founders,
Welcome to The Runway Ventures — a weekly newsletter where I deep dive into failed startup stories to help you become the top 1% founder by learning from their mistakes with actionable insights.
Today’s story is about how a promising insurtech company collapsed due to government’s bureaucracy. Let’s get to it! 🚀
Today at a Glance:
☠️ 1 Failed Startup → Kenko Health
⚠️ 2 Mistakes → Regulatory challenges that killed innovation
🧠 3 Lessons Learned → Keep your expenses low
🔗 The Runway Insights → The 10 biggest mistakes I made bootstrapping to $1M ARR
💰 Southeast Asia Funding Radar → Capital C raises 7-figure in Pre-Series A funding to create super app for Southeast Asia’s underserved
☠️ 1 Failed Startup: Kenko Health
🚀 The Rise of Kenko Health
🇮🇳 Founded in 2019 by Aniruddha Sen and Dhiraj Goel, Kenko Health wanted to revolutionise healthcare finance by offering a comprehensive suite of services, including doctor consultations, financing for complex surgeries, and mental health support.
The Problem — 😷 Many people in India faced financial burdens when seeking medical treatment, often leading to delayed care or inadequate health coverage.
India’s healthcare system was plagued by high out-of-pocket expenses, particularly for outpatient services, which accounted for a significant chunk of medical bills.
The Solution — ⛑️ Kenko was an insurtech startup that provided an affordable, holistic subscription model that included outpatient department (OPD) benefits and medicines, giving families a safety net for everyday healthcare expenses.
Their innovative model bridged the gap between routine healthcare needs and traditional insurance by partnering with insurance providers and specialist healthcare startups.
With the subscription-based model, users could easily manage their medical expenses effectively, covering everything from outpatient consultations to regular health check-ups.
🏥 In short, Kenko’s vision was to make healthcare more accessible and affordable to Indians through its subscription-based healthcare plans.
 | Kenko tackled a massive and structural problem — expensive healthcare in India. Within just a year of operation, Kenko grew to 200 corporate partnerships, covering around 150,000 individuals. 🙏🏻 More partnerships → More people got protected. |
🤯 By 2023, Kenko grew its revenue 17x from $600K in 2022 to $10 million in 2023. At its peak, it raised over $13.7 million from notable investors like Peak XV Partners, Orios Venture Partners and Beenext.
When everyone thought Kenko would revolutionise healthcare finance in India, something happened…
📉 The Fall of Kenko Health
🥵 By mid-2023, cracks began to show. Despite its revenue growth, Kenko's losses surged to $8 million in 2023.
The root cause? The inability to secure an essential insurance license from the Insurance Regulatory and Development Authority of India (IRDAI) due to Indian bureaucracy.
📌 Here’s what happened to Kenko Health:
Unfortunately, the company has run out of funds, and we were unable to infuse equity capital in time due to various internal reasons. Our company has been taken to the NCLT by a debt fund that had extended a loan to us.
2019 — Kenko Health was founded by Aniruddha Sen and Dhiraj Goel.
2021-2022 — 🤝🏻 Grew rapidly with significant corporate partnerships.
Revenue: $600K
Jan-Jun 2023 — 😮 Attempted fundraising round for failed and unable to secure insurance license amid regulatory hurdles (i.e. Indian bureaucracy).
🤦🏻♂️ For a company to get an insurance license, one of the requirements by IRDAI was to bring in a domestic investor as a lead shareholder.
It was reported that Kenko was close to bringing in a new domestic lead investor (Hero Group) as a lead shareholder, but the deal alarmed some existing investors due to significant equity dilution.
In the end, Kenko’s plans to raise $26 million in funding fell through.
Financial numbers:
Revenue: $10 million
Loss: $8 million
Jul-Dec 2023 — 🔥 Struggled financially and laid off 20% of the workforce.
Employees went unpaid for months since March 2023, the offices in Mumbai and Bengaluru shuttered, and legal action from creditors and third-party administrators (TPAs) followed.
🥺 To keep the lights on, the founders infused $1 million of personal funds, but it wasn’t enough.
Eventually, Kenko struggled to pay salaries and had to lay off 20% of the workforce.
A debt investor even took legal action and brought Kenko to the National Company Law Tribunal (NCLT) due to financial insolvency.
Aug 2024 — 👨🏻⚖️ As legal actions escalated, Kenko was officially shut down, leaving behind a trail of lawsuits and 100 employees scrambling for new jobs.
Despite raising significant funds and achieving high revenue growth, Kenko ultimately ran out of cash and collapsed due to financial mismanagement and regulatory challenges.
🙏🏻🇮🇳 The story illustrates the dangers of unchecked bureaucracy in stifling innovation and highlights the need for systemic reforms to support entrepreneurial ambitions in India’s insurance sector.
Want to learn more about Keno Health’s downfall?
⚠️ 2 Mistakes
Mistake 1: Regulatory challenges that killed innovation
To comply with IRDAI’s requirements, Kenko was close to bringing in a new domestic lead investor (Hero Group) as a lead shareholder, but the deal alarmed some existing investors due to significant equity dilution.
🤜🏻🤛🏻 Based on Kenko Heath’s shareholding, the investment’s potential return might no longer make sense to its early investors (i.e. Peak XV Partners, Beenext, Orios Venture Partners) if they got diluted significantly — hence the investor deadlock.
As a result, Kenko failed to raise $26 million in funding. The financial struggles then led to other legal consequences and layoffs and eventually shutdown.
⚠️ Besides, Aniruddha (co-founder of Kenko) recently shared that they faced numerous bureaucratic obstacles over 2 years while trying to navigate the regulatory landscape and secure an insurance license from IRDAI. Here’s the TLDR from his sharing:
The IRDAI chairman initially encouraged startups to apply for licenses, but later dismissed Kenko's application, claiming the founders “did not fit the profile” for promoters in the insurance sector.
A key IRDAI official displayed disdain for entrepreneurs, making the process more difficult.
😳 During one meeting, she said outright that they “bring shame to the country”.
A final meeting with the chairman was dismissive and condescending, and the founders were rejected due to their lack of elite connections.
In short, the failure to secure the license (due to Indian bureaucracy) led to the collapse of Kenko Health, destroying the company.
Mistake 2: Financial mismanagement
🩸 After diving deeper into the company’s financials, despite its impressive revenue growth from 2021 to 2024, its mounting loss also grew significantly.
Because of the loss, Kenko had no choice but to bring in external funding to support its operations.
To make matters worse, the regulatory challenges and legal actions from other parties stalled the company’s progress to grow further as it spent most of its time trying to get an insurance license.
🏃🏻♂️ No lead domestic investor → No insurance license → No funding → Huge loss → Ran out of cash → Shutdown
🧠 3 Lessons Learned
Lesson 1: Understand regulatory landscapes thoroughly
Don’t underestimate the power of bureaucracy, especially in highly regulated industries like healthcare and insurance.
Even if you have a groundbreaking idea, if the regulatory landscape doesn’t support it, you’ll find yourself stuck in endless red tape — just like what happened to Kenko Health.
🌟 Key Takeaways:
🧑🏻💼 Understand the regulatory requirements early on
Before launching your startup, invest time in understanding the regulatory environment you’ll operate in.
Sometimes, the biggest killer of a company is not the lack of PMF but the local regulatory compliances or changes.
If possible, engage with industry experts and legal advisors to ensure compliance from day one. This might save you from costly delays and setbacks down the road.
If you're starting a fintech company, familiarise yourself with financial regulations and compliance requirements from the outset.
This proactive approach can help you avoid roadblocks like those faced by Kenko when trying to secure their insurance license.
Knowing what regulatory challenges you’ll face could also help plan your company’s runway realistically.
Lesson 2: Keep your expenses low
📈 Having high revenue growth is impressive.
🤑 You know what’s more impressive? Profit.
🌟 Key Takeaways:
💰 Manage your cash flow effectively
Always monitor your burn rate, runway, and ensure you can sustain operations through lean and tough times.
Always have a buffer for unexpected expenses. And if you’re facing major regulatory delays, have a contingency plan to raise funds (as early as possible) or cut down on expenses relentlessly.
Revenue is important, but profitability and liquidity are even more critical. Keep an eye on your cash flow and avoid burning through your funds too quickly.
Remember — as long as you don’t die, you’ll have a chance to win.
Lesson 3: Equity dilution is a delicate balance
If your investors feel that their stake is being eroded too much, they may back out, and future rounds of funding could fall apart — this is exactly what happened to Kenko.
🌟 Key Takeaways:
🤝🏻 Set clear expectations with investors
If you expect to bring in a new investor in the next round that’d significantly dilute the shareholding of your existing investors, let them know as early as possible (ideally before even raising from your early investors).
Investors are sensitive to dilution. Don’t risk future funding by underestimating how much equity your early backers are willing to give up. Always negotiate with caution.
Finally, communicate openly to prevent misunderstandings and build trust.
🔗 The Runway Insights
The 10 biggest mistakes I made bootstrapping to $1M ARR (Link)
Why your product idea sounds too complicated (Link)
How to build your GTM strategy from scratch (Link)
The complete guide to Programmatic SEO (Link)
6 brutal truths about fundraising (Link)
Guide to selling your company (Link)
Why some IPOs fail (Link)
💰 Southeast Asia Funding Radar
Capital C raises 7-figure in Pre-Series A funding to create super app for Southeast Asia’s underserved (Link)
CARDS raises seed funding led by Katha VC to make running schools in Tier 2 and 3 cities in Indonesia easier (Link)
Collektr bags $1.3M led by AC Ventures Malaysia to help you livestream and auction authentic collectibles easily (Link)
NoneAway secures $1M in pre-seed funding to disrupt the Philippines’ property market through its AI-powered mobile app (Link)
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That’s all for today
Thanks for reading. I hope you enjoyed today's issue. More than that, I hope you’ve learned some actionable tips to build and grow your business.
You can always write to me by simply replying to this newsletter and we can chat.
See you again next week.
- Admond
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