Funding slowdown challenges India’s unicorn ambitions

By Admin

26 Jun, 2025

India’s Unicorn Boom: A Tale of Triumph and Trials
India’s startup ecosystem has garnered global recognition, producing 119 unicorns a feat that places it just behind the United States and China. Yet, amidst this celebration, a hard truth emerges: funding is a means to an end, not the end itself. Merely raising capital does not equate to building a sustainable business.

Profitability Still a Distant Dream
Data from platforms such as Tracxn and Entrackr indicate that fewer than one-fifth of Indian startups are profitable. For many, profitability often comes only after an IPO, not before. Sectors like hyperlocal delivery show promising toplines, but soaring expenses outstrip revenue   a major concern for future fundraising efforts. In Q1 2025, only one new unicorn was born   a sharp contrast to previous quarters, underlining the growing investor skepticism.

Investor Confidence is Waning
High-profile names like BigBasket, Country Delight, and Unacademy have experienced significant valuation markdowns. Even more concerning is the credibility crisis facing companies such as Byju’s, BluSmart, and Gensol, all of which are under scrutiny for allegedly inflating performance metrics or hiding true costs.

The Erosion of True Jugaad
Once upon a time, Indian startups prided themselves on jugaad   the art of innovation under constraints. True to this spirit, companies like Zerodha, Freshworks, and Agnikul Cosmos built sustainable models using frugal resources and focused execution. These were stories of disciplined ingenuity, where growth came from solving real problems rather than inflating valuations.

Speculative and Puffery Bricolage: A Dangerous Trend
Unfortunately, distorted versions of jugaad have emerged   namely speculative and puffery bricolage. The former sees startups making stretched assumptions, relying on unproven models, and creating illusions of value through storytelling. The latter uses financial trickery to inflate valuations, which eventually leads to down rounds, scrutiny, or even collapse.

Kahneman and Tversky’s Prospect Theory explains why many startups resist admitting failure. Rather than resetting expectations, they double down on inflating numbers. Investors, eager to back the next unicorn, often ignore fundamentals like unit economics and sustainability, creating a herding effect.

Case Studies of Misaligned Narratives
Byju’s, once a poster child of ed-tech innovation, operated on an aggressive sales model and questionable transparency. BluSmart projected itself as an asset-light EV model but allegedly leased vehicles at inflated costs through affiliates. Gensol, which attracted eco-conscious investors, is now facing scrutiny for opaque subsidiary operations.

The Path Forward: From Unicorns to Camels
The need of the hour isn’t more unicorns but more camels   startups that survive harsh conditions, scale sustainably, and prioritize resilience over glamour. Boat and OfBusiness exemplify this approach, having scaled gradually while staying true to transparent financials.

Founders and investors must focus on two core questions:

• Are the unit economics improving?
  
  

• Is the company transparent about its costs and dependencies?
  
  

Reform is the Real Innovation
To restore trust, systemic changes are essential. Investors must go beyond spreadsheets   incorporating cultural audits, vendor checks, and operational testing into due diligence. Regulators should enforce better disclosure norms for private markets and grant media access to verified startup data through RoC portals.

And when failures happen   as they inevitably will accountability should be shared. Boards, VCs, and late-stage investors must take responsibility, not just the founders.

Conclusion: Value Over Valuation
India’s startup legacy should be defined by value creation, not valuation peaks. The true ambition lies in nurturing startups that are auditable, authentic, and enduring. As the funding climate cools, now is the perfect moment to rediscover the essence of disciplined innovation and long-term thinking.

India doesn't just need more unicorns. It needs startups that can weather storms, walk the distance, and stay true to their mission.