India’s startup ecosystem has earned global attention, producing 119 unicorns, ranking just behind the US and China. But raising money itself should not be a reason to celebrate. Venture funding is merely a means, not the finish line.
Late-stage investors typically eye public markets. Thus, a startup’s valuation must stem from its ability to build assets and generate cash flows. Data from platforms like Tracxn and Entrackr suggest that fewer than one-fifth of Indian startups are profitable.
Profitability often follows Initial Public Offers (IPOs) rather than precedes them. Sectors such as hyperlocal delivery show decent toplines. However, their expenses often outstrip their revenues, which may impact future rounds of funding.
The funding slowdown tells the tale. In Q1 2025, only one new unicorn emerged. Investor caution is visible.
Many high-profile startups, including BigBasket, Country Delight, and Unacademy, have seen steep markdowns. More worrying are the credibility crises engulfing names like Byju’s, BluSmart, and Gensol. Each of them is under fire for allegedly inflating metrics or obfuscating costs.
These issues aren’t just financial. They reflect a deeper distortion of a once-celebrated entrepreneurial value: bricolage, or in Indian parlance, jugaad. In its purest form, bricolage refers to doing more with less.
It’s how many early-stage Indian startups got off the ground. India has its share of genuine jugaad stories. Zerodha scaled without external VC backing, leveraging tech-led automation to drive down costs.
Freshworks built its SaaS muscle in Chennai before listing on the NASDAQ, optimizing engineering costs. Agnikul Cosmos, a private space-tech firm, developed 3D-printed rocket engines with modest capital, turning engineering constraints into a competitive advantage. These are proof that true innovation often emerges not from excess funding, but from disciplined ingenuity.
However, this principle is now being misused.
Unicorn dreams meet funding reality
Two distorted forms of bricolage have emerged – speculative bricolage and puffery bricolage.
Speculative bricolage refers to startups stretching limited resources based on optimistic projections and unproven models, creating a facade of value propped up by narratives rather than numbers. This leads to inflated valuations, eventual down rounds, and sometimes regulatory scrutiny. According to Prospect Theory by Kahneman and Tversky, startups cannot see their valuation coming down.
They focus on inflating numbers to avoid admitting failure, resulting in risky startups being propped up in hopes of miraculous turnarounds. Meanwhile, investors are desperate to find the proverbial unicorn, giving rise to a herding effect. When founders pitch “asset-light scale” or “frugal innovation,” investors often suspend judgment, ignoring poor unit economics.
Byju’s is based on a narrative of tech-led education, but underneath was a model riddled with aggressive sales, opaque finances, and high churn. BluSmart claimed to be an asset-light EV platform, but reports suggest vehicles were leased from affiliates at inflated rates masking real costs. Gensol, despite attracting green capital, faces ongoing questions regarding its network of subsidiaries and transaction transparency.
These cases highlight the dangers of confusing clever financial engineering with genuine business fundamentals. In contrast, Boat and OfBusiness started as bootstrapped ventures, scaling gradually while aligning their storytelling with their numbers. For early-stage investors and founders, the litmus test for startup viability lies in two simple questions: Are unit economics improving?
Is the company transparent about its costs, margins, and dependencies? Stakeholders such as investors and promoters must align long-term sustainability goals with short-term profitability. This calls for structural reforms.
Investors should broaden due diligence beyond spreadsheets to include culture audits, vendor interviews, and operational stress tests. The focus should be on sustainability metrics, such as margins, churn, and payback, rather than valuations driven solely by capital flows and revenues. Regulators should mandate private market disclosures, and the media should have access to data from the Registrar of Companies (RoC), especially for startups eyeing public listings.
Lastly, when startups fail, the blame must not fall solely on the founders. Boards, VCs, and late-stage funders, who often override governance, must also be held accountable. India doesn’t need another unicorn.
It needs camels, who scale sustainably, are grounded in transparency, and are driven by purpose. The true legacy of India’s startup movement will be written not in valuation charts but in value creation. This calls for startups that are authentic, auditable, and enduring.