Beyond the Crisis: Lessons from ~40K Failed Startups in India.
- Jasaro.in
- Jun 23
- 5 min read
Updated: Oct 31
If you’ve been following India’s startup ecosystem, the 3rd largest startup ecosystem that once seemed unstoppable - fuelled by capital, optimism, and ambition has hit a hard pause. In 2025* alone, over 11,223 startups folded, compared to 12,717 in 2024. Across the last 3 years (2023-2025*), the number swells to over 39,860 closures.
Now, it’s easy to read those numbers and think, “crisis.” But, what’s really happening is a kind of natural selection, a painful but necessary reset that will shape the next generation of founders and companies. And if you’re a startup founder, this is the moment to pay great attention to this post.
A Tsunami of Failed Startups in India!
For context, 2021 recorded only 867 shutdowns, lowest in the past 6 years. In contrast, 2023 saw over 15,921 closures, the highest so far. From Jan-23 to Oct-25, over 39,860 startups failed in India, with 2025 alone accounting for more than 11,220 closures. Some of the prominent names like Hike, Beepkart, Astra, Ohm Mobility, Subtl AI, Otipy, Log9 Materials, ANS Commerce that were once darlings of the ecosystem, collapsed this year.
Across India, 1000s of startups are folding up, some after years of survival, others barely a few months into existence. In just 3 years, India’s narrative flipped from “the next Silicon Valley” to “the great Indian shutdown.” So what's really changed?
The Sectoral Shakeout: Who Fell Hardest?
The pain wasn’t evenly distributed. Some sectors were hit harder than others:
B2C E-Commerce: 5,776.
Enterprise Software: 4,174.
SaaS: 2,785.
HRTech: 846.
FashionTech: 840.
Healthcare: 762.
The B2C e-commerce model, once India’s crown jewel, accounts for over half of all the shutdowns, a sign that even B2B players are struggling to convert pilots into sustainable contracts amid tighter corporate tech budgets. SaaS and Enterprise Software, once thought to be safe bets, weren’t immune as well. Consumer-facing startups, meanwhile, paid the heaviest price. collapsed under its own weight. You can’t build infinite growth on discounts and investor money forever.
The Funding Winter: Death of Easy Money.
Between 2020-2022, capital (funding) was easily available. A good story (narrative) and a few promising metrics (KPIs) could unlock millions. Founders even experimented with multiple models at once, trying to find what stuck. Growth was the goal; profitability could wait. Then came 2023. The funding winter hit, and investors stopped writing cheques.
Suddenly, everyone wanted proof - traction, paying customers, defensible margins. The froth of growth at all costs disappeared, revealing how fragile many startups really were. By 2025, 7 startups shut down within a year of inception, compared to just 1 in 2024. That’s not just bad luck, it’s a structural shift. Startups are dying faster because the ecosystem is now less forgiving on the weak fundamentals.
Why Most Startups Failed?
If you zoom out, most failures trace back to a few recurring factors.
1. Lack of Product-Market Fit and Sustainability.
Too many startups built products that solved no real pain. They expanded too fast (high CAC, low LTV) owing to inflated funding cycles, but growth built on discounts or hype doesn’t last too long. When funding tightened, so did customer loyalty and retention.
2. Operational Inefficiencies.
Operational inefficiencies, weak governance, sloppy execution, and poor leadership became fatal once the money dried up (tightened VC funding).
3. Macro and Global Shocks.
Indian founders also faced global headwinds - trade slowdowns, VC pullbacks, inflation, and market volatility. Many startups were built for a bull market; few were built to survive a drought.
The Human Cost of the Funding Winter.
Behind every shutdown are people, thousands lost jobs. At least 15,000 employees were laid off in 2023, followed by over 10,000 in 2024. The broader trend since 2022 shows that Indian startups have laid off over 37,260 employees in early 2024. ~5,649 employees have been laid off by the Indian startups till Sep-2025, reflecting a 60% decline in layoffs.
For many young professionals, startups that once symbolized opportunity; now represent risk. Similar to how Silicon Valley went through similar purges in the early 2000s. From those ashes rose stronger, more disciplined companies. India is walking the same path.
A Crisis, or Maturing Up?
Here’s a different way to look at it: what if this isn’t a collapse, but a correction? For years, Indian startups equated success with valuation. Founders chased headlines, not health metrics. But this downturn is forcing a mindset shift from “how big can we grow?” to “how long can we endure?”
The Rise of Financial Discipline.
Investors are demanding more sustainable unit economics, better governance, and actual revenue. It isn't bad news; that’s maturity. In the long run, capital discipline breeds longevity.
From Quantity to Quality.
Instead of celebrating the number of startups launched each year, we’ll soon start celebrating how many survived? This correction is painful, but also necessary.
The Builders Who Will Outlast.
The next generation of Indian founders will be sharper, tougher, and more grounded. They’ll understand cash flow, not just runway. They’ll build for value, not valuation. The entrepreneurs who stay through this storm are the ones who’ll define the next decade.
The Road Ahead: India 2.0
Despite the gloomy statistics, there’s reason for optimism. India still has the third-largest startup ecosystem in the world. The talent, ambition, and market opportunity haven’t disappeared; they’re just being forced through a refining fire. Founders who can adapt, who learn to survive without easy money will come out stronger. This is how ecosystems mature. It’s not about preventing failures; it’s about learning from them fast enough to build better the next time.
5 Silent Startup Killers!
Avoid these costly mistakes before your next round.
How to Build a Resilient Startup?
1. Prioritize Product-Market Fit & Sustainable Revenue
Find real Product-Market Fit (PMF), funding before that it is a ticking time bomb.
Don’t build on vanity metrics or speculative growth.
2. Be Lean, Flexible, and Focused
Keep burn rates low, run leaner than ever.
Lean teams, fast pivots, and ruthlessly tested hypotheses should be your competitive edge.
3. Embrace Financial Discipline & Governance
Prioritize profitability over growth at all costs.
Model real margins, cash burn, and use capital as fuel, not comfort.
Invest in financial controls, leadership depth, and measured scaling plans.
Raise at a reasonable valuation, don't let FOMO push you too high.
4. Create Structural and Competitive Advantage
Position in sectors where India has tailwinds, AI, deep tech, logistics, and use government frameworks.
Build value that customers will pay for.
Conclusion
When 11,220 startups die in less than a year, it’s easy to panic. But history tells us that the best companies often emerge after such purges. The startups that survive 2025 will be stronger not because they avoided failure, but because they adapted to it. If you’re building in India today, this is your stress test. The question isn’t how many startups shut down, it’s who learns from the wreckage and builds differently. After all, every “great shutdown” hides the seeds of the next great startup boom.
Sources: Tracxn, The Wire, Financial Express, Tice News, Economic Times, TechCrunch, Layoffs.fyi. 2025*: Jan-Oct, 2025.
Content updated on 27-Oct-2025.
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