Startup Frauds: How Optics, PR, Policy Gaps & Oversight Fail India’s Startup Dream

By Rajesh Joshi

The explosive revelations surrounding BluSmart and Gensol have shaken India’s startup ecosystem—yet again. What initially appeared as a promising electric mobility venture, bolstered by glossy presentations and big-name investors, is now mired in controversy over alleged fund diversion, false claims, and outright corporate misconduct. But beyond the headlines lies a deeper, systemic rot—one that calls into question the very structure of how startups are built, promoted, and supported in India.

The promoters of BluSmart and Gensol—Anmol and Gagan Jaggi—are accused of siphoning off public and investor money to fund a lavish lifestyle. SEBI’s interim order reveals a staggering ₹262 crore diverted for personal use: ₹43 crore spent on a luxury flat at Gurugram’s upscale Camellias, ₹26 lakh blown on a premium golf kit from the US, ₹11 crore sent to relatives, and money allegedly routed into unrelated entities like Third Unicorn and BatX Energies. Worse still, the much-hyped EV factory showcased in Chakan is a hollow shell—leased but non-operational.

This isn’t just a case of corporate fraud. It’s a symptom of a larger ecosystem problem where being seen matters more than actually building.

The Illusion of Success

Today, India's startup culture is increasingly driven by visibility. Entrepreneurs who attend government summits, share photos with bureaucrats, speak at conferences, and get profiled in media features are often rewarded with easier access to government schemes, subsidies, and investor attention. Meanwhile, the quiet, sincere builders—those toiling away in Tier 2 cities, building real products, solving real problems—are often overlooked.

Once upon a time, media would go out and discover these unsung heroes. Today, the ecosystem is PR-driven. Journalists are handed pre-approved narratives and startup success stories wrapped in glossy decks and metrics. Instead of uncovering the truth, many simply echo what they’re told. This is why companies like BluSmart can build a brand of transparency without having any transparency at all.

As SEBI’s findings suggest, even the numbers BluSmart boasted were suspect—pre-orders without token payments, inflated claims about fleet size, and false portrayal of manufacturing capabilities. All of this was peddled under the nose of auditors, independent directors, investors, and regulators.

 Accountability Failure at Every Level

The BluSmart case has exposed the fragility of India’s corporate governance framework. Where were the independent directors when company funds were being misused? How did auditors sign off on financial statements that concealed these activities? BluSmart and Gensol promoters—the Jaggi brothers—should not be allowed to get away with corporate fund diversion for personal use. But neither should the gatekeepers who failed to do their jobs.

If independent directors are rubber-stamping board decisions, and auditors are blind to discrepancies, then what protection does any investor—or taxpayer—really have?

This is a clarion call for regulatory reform. SEBI must not only punish the culprits but also set a precedent that accountability doesn’t stop at the promoter’s desk. When fraud occurs, every party involved in governance and oversight should be scrutinized and held accountable.

The Collateral Damage

As with every scam, the fallout goes beyond the guilty. Honest founders, particularly early-stage startups that rely on government support or institutional funding, are now likely to face increased scrutiny and trust deficit. Government schemes may become more restrictive, regulations more bureaucratic, and media more skeptical. In other words, the entire startup ecosystem pays the price for a few bad actors.

Investors too may pull back from bold bets, further hurting genuine innovation. This is the vicious cycle that has played out time and again—from Satyam to Housing.com, from BharatPe to now BluSmart.

Resetting the Startup Story

India prides itself on being the third-largest startup ecosystem in the world. But with size must come maturity. The ecosystem must now reflect, reform, and resist the temptation of style over substance. Media must return to investigative rigor, regulators must strengthen their frameworks, and entrepreneurs must shift the focus back to solving real problems—not just crafting stories that sell.

India may be the third-largest startup ecosystem globally, but we can no longer afford third-rate startup governance. The BluSmart case must serve as a pivot point.

• Regulators like SEBI must go beyond paperwork and investigate what’s actually on the ground.
• Media must reclaim its watchdog role—not lap up PR handouts.
• Investors and Boards must be more than cheerleaders. They must ask hard questions.
• Entrepreneurs must shift their focus from speaking gigs to solid ventures.

The BluSmart saga is a stark reminder that optics cannot replace operations, PR cannot replace product, and hype cannot replace governance. This is the reckoning Indian startups needed—and one they must now survive, wiser and stronger.

About the Author:
Rajesh Joshi is a seasoned entrepreneur, startup catalyst, and policy advisor with over two decades of experience in building, mentoring, and funding early-stage ventures. As an innovation evangelist and angel investor, he is passionate about shaping a transparent and impactful startup ecosystem in India. He frequently advises policymakers and ecosystem stakeholders on startup governance and sustainable innovation.

Disclaimer:The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of TICE or its editorial team. The facts presented are based on publicly available information and regulatory disclosures at the time of writing.