India’s startup ecosystem has, over the past decade, emerged as one of the most dynamic in the world. It boasts over 100 unicorns, has attracted billions in venture capital, and has produced entrepreneurs who are now celebrated as icons of the “new India.” On the surface, it’s a remarkable story—one of youthful ambition, risk-taking, and innovation. But scratch beneath that glossy exterior, and the picture is far less flattering. The truth is that the Indian startup ecosystem is facing a silent crisis, riddled with structural flaws that threaten its long-term credibility and sustainability. The pursuit of vanity metrics, the glorification of failure without accountability, weak corporate governance, and a broken funding culture are just some of the symptoms of a deeper malaise. What was supposed to be a revolution in innovation has, in many ways, become an echo chamber of exaggerated success stories, where hype overshadows hard truth and perception is mistaken for performance.
At the recent Startup Mahakumbh in New Delhi, Commerce and Industry Minister Piyush Goyal provided a candid assessment of India’s startup landscape, urging entrepreneurs to pivot towards high-tech innovation. He contrasted India’s focus on convenience-driven services with China’s advancements in sectors like electric mobility, battery technology, robotics, and 3D manufacturing. Goyal questioned, “Are we going to be happy being delivery boys and girls? Is that the destiny of India?” He emphasized the need for Indian startups to aspire towards technological progress rather than concentrating predominantly on services like rapid food and grocery delivery. These remarks sparked a debate within the startup community, highlighting the tension between current market trends and the aspiration for deep-tech innovation.
At the heart of the problem lies an unhealthy obsession with valuations. Startups today are being built more for investors than for customers. The race to become the next unicorn has overshadowed the more meaningful objective of building a sustainable, value-driven business. Founders often structure their companies not around solving a real-world problem, but around the expectations of venture capitalists who are more concerned with growth projections and exit strategies than long-term impact. This leads to a dangerous distortion of priorities. Business models are molded to look attractive on pitch decks, rather than being grounded in economic reality. Many startups burn enormous amounts of cash to acquire users, only to realize later that these users have little loyalty and even less willingness to pay. The result? Businesses that are bloated in appearance but hollow at the core.
The culture of cash burn has become deeply embedded in the ecosystem. Fueled by successive funding rounds, many startups fall into the trap of reckless spending—splashing out on customer acquisition, influencer marketing, hiring sprees, and plush offices—without a solid revenue model to back it up. Discounts and freebies have replaced genuine customer value, and profitability is deferred endlessly in the name of “scale.” This isn’t just financially irresponsible—it’s intellectually dishonest. Building a startup that survives on external funding alone is not entrepreneurship; it’s dependency dressed up as disruption. As the global funding winter sets in and investors begin to scrutinize balance sheets more closely, we’re witnessing the fallout: massive layoffs, down rounds, startup shutdowns, and a shaken investor community that now questions the very promise of India’s entrepreneurial boom.
A parallel crisis exists in corporate governance. Several high-profile Indian startups have recently come under fire for financial irregularities, founder misconduct, and a general lack of transparency. The problem isn’t just individual misbehavior—it’s systemic. Boards are often filled with friendly faces rather than independent professionals. Founders wield unchecked power, treating companies like personal kingdoms. Investors, in their rush to ride the next big wave, have at times ignored early red flags, choosing to overlook governance lapses as long as the valuation curve was going up. But now that some of these startups are crumbling under the weight of scrutiny, the lack of institutional maturity is being laid bare. Without strong governance, even the most innovative startups are vulnerable to collapse.
There’s also a herd mentality that plagues the ecosystem. Once a startup in a particular sector gets funding or media attention, a flood of clones follows. Everyone wants to be the next Zomato, the next Byju’s, or the next Flipkart. This leads to saturation in certain markets, price wars, and unsustainable competition. Startups end up fighting over the same user base with little differentiation in offering or strategy. Meanwhile, areas that genuinely need innovation—like agri-tech, healthcare access, rural financial services, and sustainable energy—remain underfunded and underexplored. The chase for the “next big thing” often blinds investors and founders to India’s ground realities, where solutions for the underserved could unlock far more long-term value than yet another 10-minute delivery service in urban India.
Then comes the issue of poor execution. Ideas are celebrated too early, often before they are even tested in the market. Founders build elaborate narratives around potential, while ignoring the operational rigor needed to scale a business. Execution suffers due to lack of discipline, inadequate systems, and inexperienced leadership. Startups are often managed more like college projects than companies—with chaos, poor planning, and frequent pivots masquerading as “agility.” Media attention, social media followers, and invite-only events have replaced product development, customer feedback, and process excellence. The glamorization of entrepreneurship has created a generation of startup founders who are more focused on building a personal brand than a lasting company.
The glorification of failure is another cultural problem. It’s important to accept that failure is part of the entrepreneurial journey, but there’s a fine line between learning from failure and romanticizing it. In India’s startup circles, failed founders are sometimes celebrated without any critical evaluation of why they failed. Was it market timing? Was it flawed execution? Was it a lack of customer understanding? Or worse—was it poor ethics or mismanagement? Without introspection, failure becomes a repetitive cycle, with the same mistakes being made again and again—only this time, with a new round of funding and a rebranded vision. A culture of accountability is urgently needed.
There’s also the issue of unequal access. Despite all the noise about democratizing entrepreneurship, the ecosystem still largely serves the privileged. Founders from elite institutions, urban centers, or who have international exposure are far more likely to get funding and media attention. In contrast, entrepreneurs from Tier-II and Tier-III towns, or from less privileged backgrounds, often lack access to investor networks and capital. This limits the diversity of ideas and undermines the true potential of Indian entrepreneurship. If the system continues to reward pedigree over potential, it will remain exclusionary, missing out on the next wave of truly transformative startups.
Even when startups manage to scale, many falter when they go public. Several Indian startups that launched IPOs in recent years were met with skepticism by retail investors due to their lack of profitability and opaque financials. These public flops not only damage individual reputations—they erode investor trust in the entire sector. Regulators have tightened scrutiny, and retail investors are now wary of putting money into startups that are long on storytelling but short on substance. Going public is not just a milestone; it is a test of maturity, transparency, and resilience. Most Indian startups are simply not ready for it.
In the final analysis, what the Indian startup ecosystem needs is a reset. The time has come to move from chasing unicorns to nurturing camels—startups that are resilient, efficient, and built for the long haul. We must reject the narrative that growth is the only metric that matters. Real entrepreneurship is not about raising a billion dollars; it’s about creating a business that solves a problem, serves people, and stands the test of time. India doesn’t need more “next big things.” It needs solid, problem-solving companies that can scale with purpose, operate with integrity, and innovate with impact. The hype is unsustainable. Substance must take center stage. Only then can India’s startup dream become a lasting reality.
