India’s startup ecosystem has earned global attention, producing 119 unicorns and ranking just behind the US and China. But raising money itself should not be a reason to celebrate. Venture funding is merely a means to an end.
Data from platforms like Tracxn and Entrackr suggest that fewer than one-fifth of Indian startups are profitable. More often than not, profitability follows Initial Public Offers (IPOs) rather than precedes them. Sectors such as hyperlocal delivery show decent toplines, but their expenses often outstrip their revenues.
This may impact rounds of funding, as evidenced by the funding slowdown in Q1 2025, where only one new unicorn emerged. More worrying are the credibility crises engulfing names like Byju’s, BluSmart, and Gensol, accused of inflating metrics or obfuscating costs. These issues reflect a deeper distortion of the value of bricolage, or jugaad.
Two distorted forms of bricolage have emerged: speculative bricolage and puffery bricolage. Both are propped up by narratives rather than numbers, often leading to inflated valuations, eventual down rounds, and sometimes, regulatory scrutiny. The behaviors of founders and investors can be explained by the principles of behavioral economics.
According to Prospect Theory by Kahneman and Tversky, start-ups cannot see their valuation coming down.
India’s startup credibility challenge
They focus on inflating numbers to avoid admitting failure, resulting in risky startups getting propped up in hopes of miraculous turnarounds.
Investors, desperate to place their hands on the proverbial unicorn, often follow a herding effect. When founders pitch “asset-light scale” or “frugal innovation,” investors frequently suspend judgment, ignoring poor unit economics. Thus, bricolage, originally a virtue, often becomes a smokescreen for irrational exuberance.
Stakeholders, such as investors and promoters, must align long-term sustainability goals with short-term profitability objectives. Investors should broaden due diligence beyond spreadsheets, using 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 disclosures, and the media should have access to data from the Registrar of Companies (RoC), especially for startups considering public listings. 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.
In conclusion, India doesn’t need another unicorn; it needs camels—startups that scale sustainably, remain grounded in transparency, and are driven by purpose. The true legacy of this movement will be written not in valuation charts but in value creation. Hence, startups need to be authentic, auditable, and enduring.
