Source: Outlook Business
After years of chasing billion-dollar values, India’s startup ecosystem is coming down to reality. For now, the experts and investors are asking these companies to pivot toward: responsible governance and generating sustainable profits and long-term value creation instead of growth at all costs and high valuations.
Unicorn Hype Coming to an End
India’s unicorns, companies valued above $1 billion had a meteoric rise from 2015 and 2022, but the pace has finally stabilized. In 2023, there were only two new unicorns. And in 2025, there have only been six so far, with 90 recorded USD deals for the first four months.
Fledgling firms like Byju’s and Paytm, which were once poster children of the startup world have seen valuations drop at least 90%. This has made investors more careful. Private funding across Indian startup startups fell off a cliff from $26 billion in 2022 to just $9.5 billion in 2023.
Concerns Over Poor Governance
Experts say many startups have focused too much on growth and not enough on good business practice. A sizable number of companies examined spent large sums of money to rapidly increase revenue but did not develop sustainable or profitable businesses.
A key contributor to this has been poor governance. In many cases, start-ups have been established and run by founders with their own boards answering to no one else and few external advisors, which resulted in poor decision making and financial supervision. Where this has resulted in internal mismanagement and poor governance, ideally this would have been the path for resolution for many firms if it were not for lack of transparency.
New Models of Sustainable Startups
Investors today are looking for more balanced business models. Instead of only chasing exorbitant valuations, they support startups that grow steadily with diligence. Startups today are being referred to as animals like:
- Camels: Strong and stable, can endure difficult stretches over time
- Cockroaches: Small, tough to kill, and highly resilient
- Zebras: Companies that successfully balance profit and social impact
Kunal Bahl, co-founder of Titan Capital, coined the term “Indicorn” for Indian startups that are profitable, sustainable and independent of high valuations.
Four Priority Areas for Improvement
To develop a healthier startup ecosystem, experts are recommending improvements in four key areas:
- Better Use of Capital: Startups need to be more conservative with their capital; they also need to be working to access local capital. Governments can help by creating tax policies for investors and employees that are more friendly to startup organisations.
- Stronger Governance: Companies with independent and qualified board members. Founders must become more secure with themselves and work on building trust, incentives and transparency for their stakeholders, vs. just their personal brand.
- Profit vs. Growth: Startups must focus on products and services that generate order and revenue, and retain customers, rather than just acquiring users without margin.
- Support Tier 2 & 3 Cities and Green Startups: Many of the newer startups coming out of Tier 2 and tier 3 cities are lean and focused. Further, businesses that focus on solutions to help with sustainability and environmental problems can help promote India as a special and unique destination for startup incubation.
Looking Forward: India is aiming to be a $7 trillion economy by 2030. This will only happen if we elevate our startup ecosystem beyond the hype and obsession of just that, hype, and follow-through with real long-term value. We must support businesses that are well-governed, profitable and socially responsible and deserve to be supported through a critical time.
Disclaimer: The views expressed in this article are those of the author, and when possible, based on information and opinions that exist in the industry. This is meant to be informative content and not financial or investment advice. The reader should confirm facts on their own.
