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What is the story about?
At first glance, India’s startup ecosystem appeared to stabilise in 2025, as the number of shutdowns fell sharply, offering a relief after a bruising 2024. But the companies that did shut down this year, tell a more uncomfortable story, one about leverage, delayed profitability, and the limits of scale-first growth.
According to data from Tracxn, around 730 startups shut down in 2025, dramatically down from 3,903 closures in 2024. The decline is real, but it is also misleading if read as a sign of renewed health.
The Department for Promotion of Industry and Internal Trade (DPIIT) lists over 2.06 lakh registered startups in India. Yet in 2025, several well-funded, high-visibility ventures with global investors could not survive a prolonged funding squeeze. The ecosystem did not collapse, it recalibrated, and the cost of past excesses came due.
The steep fall in closures has less to do with resilience and more to do with arithmetic. Far fewer startups were founded after mid-2022, as venture capital slowed and valuations corrected. Therefore, by 2025, the pipeline of fragile, undercapitalised new ventures had already thinned.
Also read: From hype to hard proof: India’s deep tech bets turn commercial in 2025, say experts
What remained were larger, older startups and the companies with scale, payrolls, debt, and expectations built during years of abundant capital. Their failures were fewer in number but far more consequential.
The Good Glamm Group
The Good Glamm Group became one of the most telling examples of 2025. Once valued at over $1.2 billion, the company pursued an aggressive roll-up strategy, acquiring multiple beauty and content brands to build scale quickly. That strategy worked when capital was cheap. It failed when cash flows tightened.
High leverage, delayed profitability, and working-capital stress collided with an unforgiving funding environment, refinancing became difficult and optionality disappeared. What had once been rewarded as ambition was exposed as fragility. This pattern also repeated elsewhere, albeit in different forms.
Hike
Hike’s shutdown underlined a different risk. The company did not fail because it lacked funding but because it lost relevance.
Once an early challenger in India’s messaging space, Hike struggled to compete with global platforms that benefited from scale and network effects. The company's pivot into gaming and Web3 reflected ambition, but lacked a product-market fit. Therefore, the user engagement was never recovered, and the business slowly ran out of reasons to exist.
In 2025, relevance proved just as critical as runway.
Dunzo
Dunzo’s struggles reinforced a lesson that India’s consumer internet sector has learned repeatedly: convenience does not guarantee viability.
Hyperlocal delivery promised speed and scale, but the economics remained fragile. High burn rates, thin margins, and intense competition left little room for error. When investor patience ran out, the business model was left exposed.
Builder.ai
Builder.ai represented a more global phenomenon. Artificial intelligence remained a magnet for capital, but in 2025, the market began separating promise from performance.
Execution gaps, governance questions, and cash-flow challenges weighed heavily. AI alone was no longer enough, investors demanded operational discipline, defensible products, and clarity on monetisation.
BluSmart
BluSmart’s shutdown combined structural and credibility challenges.
The company built a fleet-owned electric mobility model, betting that vertical integration would create long-term efficiencies and a superior customer experience. That strategy demanded heavy upfront investment: vehicles, charging infrastructure, maintenance, and drivers resulting in high fixed costs and sustained capital requirements.
By 2025, as credit tightened and funding became selective, those structural pressures intensified. At the same time, promoter-level controversies and governance concerns began to weigh on investor confidence, complicating fundraising and lender support.
Also read: Organisational memory is the next frontier in enterprise AI, says Buddi AI Founder Anith Patel
The combination proved damaging. Even as EV mobility retained long-term promise, BluSmart’s ability to secure fresh capital weakened. Growth could not be sustained, and optionality narrowed rapidly.
BluSmart did not shut down for a single reason. It exited because capital intensity collided with a funding winter, and governance risks removed the margin for error.
A More Institutional Ecosystem Emerges
Taken together, 2025’s shutdowns mark a shift in how India’s startup ecosystem is being judged.
This was not a year of panic. It was a year of enforcement.
India’s startup story is far from over but it is entering a more sober phase. Capital is still available, but it is cautious. Growth is still possible, but it must be earned. Valuations are still high, but they are no longer unconditional.
The fall in shutdown numbers may suggest calm. The companies that shut down suggest something else entirely: the ecosystem is learning to live without excess.
And that may ultimately be its most important correction yet.
According to data from Tracxn, around 730 startups shut down in 2025, dramatically down from 3,903 closures in 2024. The decline is real, but it is also misleading if read as a sign of renewed health.
The Department for Promotion of Industry and Internal Trade (DPIIT) lists over 2.06 lakh registered startups in India. Yet in 2025, several well-funded, high-visibility ventures with global investors could not survive a prolonged funding squeeze. The ecosystem did not collapse, it recalibrated, and the cost of past excesses came due.
The steep fall in closures has less to do with resilience and more to do with arithmetic. Far fewer startups were founded after mid-2022, as venture capital slowed and valuations corrected. Therefore, by 2025, the pipeline of fragile, undercapitalised new ventures had already thinned.
Also read: From hype to hard proof: India’s deep tech bets turn commercial in 2025, say experts
What remained were larger, older startups and the companies with scale, payrolls, debt, and expectations built during years of abundant capital. Their failures were fewer in number but far more consequential.
The Good Glamm Group
The Good Glamm Group became one of the most telling examples of 2025. Once valued at over $1.2 billion, the company pursued an aggressive roll-up strategy, acquiring multiple beauty and content brands to build scale quickly. That strategy worked when capital was cheap. It failed when cash flows tightened.
High leverage, delayed profitability, and working-capital stress collided with an unforgiving funding environment, refinancing became difficult and optionality disappeared. What had once been rewarded as ambition was exposed as fragility. This pattern also repeated elsewhere, albeit in different forms.
Hike
Hike’s shutdown underlined a different risk. The company did not fail because it lacked funding but because it lost relevance.
Once an early challenger in India’s messaging space, Hike struggled to compete with global platforms that benefited from scale and network effects. The company's pivot into gaming and Web3 reflected ambition, but lacked a product-market fit. Therefore, the user engagement was never recovered, and the business slowly ran out of reasons to exist.
In 2025, relevance proved just as critical as runway.
Dunzo
Dunzo’s struggles reinforced a lesson that India’s consumer internet sector has learned repeatedly: convenience does not guarantee viability.
Hyperlocal delivery promised speed and scale, but the economics remained fragile. High burn rates, thin margins, and intense competition left little room for error. When investor patience ran out, the business model was left exposed.
Builder.ai
Builder.ai represented a more global phenomenon. Artificial intelligence remained a magnet for capital, but in 2025, the market began separating promise from performance.
Execution gaps, governance questions, and cash-flow challenges weighed heavily. AI alone was no longer enough, investors demanded operational discipline, defensible products, and clarity on monetisation.
BluSmart
BluSmart’s shutdown combined structural and credibility challenges.
The company built a fleet-owned electric mobility model, betting that vertical integration would create long-term efficiencies and a superior customer experience. That strategy demanded heavy upfront investment: vehicles, charging infrastructure, maintenance, and drivers resulting in high fixed costs and sustained capital requirements.
By 2025, as credit tightened and funding became selective, those structural pressures intensified. At the same time, promoter-level controversies and governance concerns began to weigh on investor confidence, complicating fundraising and lender support.
Also read: Organisational memory is the next frontier in enterprise AI, says Buddi AI Founder Anith Patel
The combination proved damaging. Even as EV mobility retained long-term promise, BluSmart’s ability to secure fresh capital weakened. Growth could not be sustained, and optionality narrowed rapidly.
BluSmart did not shut down for a single reason. It exited because capital intensity collided with a funding winter, and governance risks removed the margin for error.
| Rank | Startup | Peak Valuation (Approx.) | Key Investors | Primary Reason for Shutdown |
| 1 | The Good Glamm Group | $1.2-1.3 billion | Accel, Bessemer Venture Partners, Prosus, Warburg Pincus | Debt-fuelled roll-up strategy, delayed profitability, working-capital stress, inability to refinance |
| 2 | Hike | ~$1 billion | Tiger Global, SoftBank | Loss of core messaging relevance, failed pivots into gaming/Web3, declining user engagement |
| 3 | Dunzo | ~$700-800 million | Reliance Retail, Google, Blume Ventures | Unsustainable unit economics in hyperlocal delivery, high burn, funding pullback |
| 4 | Builder.ai | ~$600- 700 million | Qatar Investment Authority, Jungle Ventures | AI hype outpaced product reality, execution gaps, governance and cash-flow issues |
| 5 | BluSmart | ~$300-350 million | Alteria Capital, BlackSoil, Survam Partners | Capital-intensive EV fleet model, high fixed costs, funding slowdown amid tightening credit |
A More Institutional Ecosystem Emerges
Taken together, 2025’s shutdowns mark a shift in how India’s startup ecosystem is being judged.
- Scale without profitability is no longer celebrated
- Debt-fuelled growth carries real penalties
- Governance and cash visibility are non-negotiable
- Product relevance matters as much as funding
This was not a year of panic. It was a year of enforcement.
India’s startup story is far from over but it is entering a more sober phase. Capital is still available, but it is cautious. Growth is still possible, but it must be earned. Valuations are still high, but they are no longer unconditional.
The fall in shutdown numbers may suggest calm. The companies that shut down suggest something else entirely: the ecosystem is learning to live without excess.
And that may ultimately be its most important correction yet.
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