Indian Startups Shutdown Wave: Why 28K Failed & How to Survive?
- Jasaro.in
- Jun 23
- 3 min read
The Indian startup ecosystem saw a dramatic surge in closures, over 28,000 startups shut down in just two years i.e. 2023-24, stirring shock across the country.
In this article, we’ll unpack why so many startups are failing, whether this may be a healthy shake-up, and what aspiring founders like you do to succeed in 2025.
Understanding the Scale of Indian Startups Shutdown!
A Startup Shutdown Tsunami
In 2023, 15,921 startups closed, while in 2024, another 12,717 startups shut down.
This represents a 12-fold increase compared to the ~2,300 closures between 2019-2022.
Meanwhile, the number of startups launched also plummeted from ~9,600 new companies (2019–22 average per year) to mere 5,264 in 2024.
Till March 2025, only 125 startups were launched.
Sectoral Analysis
The sectors that witnessed the maximum shutdowns include AgriTech, FinTech, EdTech, and HealthTech. They failed primarily because the early and large capital infusion led to high cash burn followed by a growth-at-all-cost mentality. Subsequently, low customer retention resulted in high operational costs and unsustainability.
Acquisition Drought
Acquisitions dropped from 248 deals in 2021 to just 131 in 2024, further reducing exit liquidity.
Why are Indian Startups Failing: A Multifaceted Breakdown
Funding Correction & Capital Crunch
The 2023–24 funding winter forced startups to tighten belts and survive solely on real metrics, not hype. Layoffs underscored this pressure: 15,000 employees were laid off in 2023, following over 10,000 in 2024.
Lack of Product-Market Fit & Viability
Many startups expanded too fast during inflated funding cycles, chasing vanity metrics over real product-market fit.
Team & Operational Weaknesses
Operational inefficiencies, lack of governance, and in-effective or bad leadership became fatal, during the tightened VC funding.
Macro & Global Shocks
Global economic instability, trade tariffs, volatile financial markets, and tight global VC funding (funding winter), have collectively rippled through Indian startups.
Ecosystem Shakeout: Crisis or Maturity?
Natural Ecosystem Reset
Rather than signaling doom, many experts call this a “delayed correction”, shifting focus from creating a large number of companies (quantity) to building a smaller number of strong, sustainable ones (quality).
Rise of Financial Discipline
Investors have pivoted to sustainable business models, governance standards, and defensible customer retention, marking a shift from ride-the-hype era .
Resilient Survivors
Those startups that pivot, optimize operations, and focus on real-world value continue to grow, paving the way for deeper, healthier entrepreneurship .
Silver Linings & Structural Shifts
Government Support & Deep-Tech Investment
Startup India continues to onboard ventures (159,000+ recognized so far), and the government has allocated ₹10,000 crores for AI, quantum, and semiconductor startups.
Sectoral Evolution
Categories like health-tech, ed-tech, fintech, and agritech are seeing a pivot toward real value creation, away from overemphasis on scale.
Leaner, Smarter Foundership
Founder maturity is increasing: 24-year-old entrepreneurs can leverage this moment to build lean, capital-efficient, profitable startups.
Global Context and 2025 Outlook
Worldwide Crunch
In the U.S., shutdowns among Carta-listed startups rose ~25.6% from 769 (2023) to 966 (2024). TechCrunch predicts 2025 will continue to be brutal.
VC Caution & Funding Chill
U.S. VCs are pushing out investment timelines, delaying IPOs, and avoiding hardware or chinese startups.
Strategic Opportunities Ahead
Despite caution, sectors like AI, defense tech, and nearshoring logistics are attracting renewed interest and capital.
How to Build Resilient Startups in 2025?
1. Prioritize Product-Market Fit & Sustainable Revenue
Find real PMF, funding without 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
Key Takeaways:
28+K startups closed in 2023–24 in India.
New launches have almost halved, only 5,264 in 2024.
Failures are both correctional and foundational - making way for deeper, long-term ventures.
Globally, funding remains constrained, but strategic sectors still flourish.
This isn’t just a wave of startup failures, it’s a foundation for a stronger, more resilient generation of entrepreneurs. So founders, sharpen your focus on real value, conserve cash, and plan your company for both growth and resilience.
Sources: The Wire, Financial Express, Tice News, Economic Times, TechCrunch.
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