OYO to BYJU’S: How Greed Is Gutting India’s Startup Ecosystem

India’s startup dream was built on grit, ingenuity, and ambition. But over the past few years, that dream has begun to fray. What was once a story of innovation and global promise is now clouded by controversy, governance failures, and a growing trust deficit. This deepeningIndia’s startup ecosystem governance crisis has turned a generation of innovators into cautionary tales about unchecked power, greed, and weak oversight.

Founders, venture capitalists, and investors have turned into influencers, show hosts and content creators—chasing attention and valuation in equal measure. The startup winter has arrived, and with it, a dense fog of confusion and mistrust hangs over India’s entrepreneurial landscape.

In early November 2025, that crisis of credibility came sharply into focus. PRISM Holdings—the parent company of hospitality major OYO—proposed a bonus-share plan offering one CCPS (Compulsorily Convertible Preference Share) for every 6,000 equity shares held, linked to IPO milestones. The optics were disastrous. Critics called it a “legalized loot,” arguing it unfairly rewarded insiders at the expense of others. Within days, the company withdrew the plan—but not before it sparked a nationwide debate on ethics and accountability in India’s startup ecosystem.

The OYO episode was not an isolated misstep. It reflected a deeper, systemic malaise—where unchecked ambition and blurred lines between ownership and oversight threaten to hollow out one of India’s proudest economic achievements.

The Cult of the Founder: From Visionary to Untouchable

In the early years, India’s startup founders embodied aspiration—bold entrepreneurs who challenged convention and redefined industry norms. But as valuations soared and fame followed, a troubling pattern emerged: founders became not just visionaries but monarchs of their own empires. This unchecked dominance has accelerated India’s startup ecosystem governance crisis, revealing the fragility beneath the country’s most celebrated business success stories.

BharatPe: When Ambition Overrode Accountability

Co-founder Ashneer Grover of BharatPe, once hailed as the poster child of startup hustle, became the face of governance failure when forensic audits revealed alleged vendor fraud and inflated invoices. What began as a corporate dispute turned into a public spectacle, forcing his ouster and prompting investors to rethink how much unchecked power founders should wield.

GoMechanic: The Illusion of Growth

Soon after, GoMechanic, a promising auto-tech venture, imploded after admitting to “errors in financial reporting.” Behind the apology lay inflated revenues, fictitious garages, and doctored metrics designed to impress investors. The fallout was swift, layoffs massive, and the message clear: growth built on deception cannot last.

BYJU’S: From Classroom Hero to Case Study in Crisis

Then came BYJU’S, once valued at over $22 billion and celebrated as India’s edtech success story. Now, the company stands battered by allegations of financial opacity, delayed audits, and aggressive sales tactics. Regulatory probes under FEMA and investor lawsuits have transformed it into a cautionary tale of how scale without structure breeds chaos.

Each of these stories underlines a simple truth: when charisma replaces compliance, governance collapses.

Governance Shock in the Green Economy: BluSmart and Gensol

Just as the public began to tire of fintech and edtech scandals, a fresh shock erupted from India’s sustainability sector.

BluSmart Mobility, the electric ride-hailing startup once hailed as a clean-tech pioneer, found itself under SEBI scrutiny. Its listed affiliate, Gensol Engineering, had raised nearly ₹978 crore in loans to finance 6,400 EVs for BluSmart. Investigations revealed that fewer than 4,800 vehicles were delivered, and funds were allegedly diverted for personal or related-party use.

The scandal hit hard because it betrayed the “green” promise. ESG-focused investors who championed BluSmart as a climate solution were left questioning how easily sustainability narratives can hide weak governance. For regulators and investors alike, BluSmart’s case deepened the visible cracks in India’s startup ecosystem governance crisis, showing that even sectors built on virtue are not immune to vice.

In an ecosystem desperate for credibility, BluSmart’s unraveling made one thing clear: ethical failure knows no industry boundaries.

Investor Myopia and Regulatory Blind Spots

Founders aren’t the only ones to blame. Investors who bankroll them often share equal responsibility. In their race for unicorns and quick exits, venture capital firms have prioritized hype over hygiene.

Most term sheets lack enforceable governance or ethics clauses, and board meetings focus more on metrics than on integrity. Meanwhile, India’s regulatory framework hasn’t kept pace with its rapidly expanding startup economy. SEBI regulates listed firms, but most startups—unlisted and privately held—operate beyond its reach.

With weak whistleblower protections and limited disclosure requirements, India’s private market has become a blind spot—a system that rewards opacity and punishes transparency until crisis forces reform. The failure to tighten oversight continues to widen India’s startup ecosystem governance crisis, where founders dominate unchecked and investors remain complicit in the silence.

What Fuels the Greed

Greed in India’s startup ecosystem isn’t accidental—it’s systemic.

Founders face relentless pressure to scale faster and burn capital to impress investors. Media glorification turns entrepreneurs into celebrities, creating echo chambers that reward audacity over accountability. The relentless race for IPOs and unicorn status transforms startups into vanity projects built on inflated numbers.

In this environment, compliance becomes a checkbox, not a conviction. Governance turns reactive instead of preventive. Ethics—once central to India’s entrepreneurial rise—has become negotiable.

Rebooting the Startup Ethos: The Way Forward

India’s startup ecosystem stands at a crossroads. To preserve its credibility and unlock its full potential, it must move from rhetoric to reform.

1. Make Governance Audits Mandatory
   Independent, third-party audits should be compulsory for startups crossing a defined funding or revenue threshold. Transparency must be the baseline, not an afterthought.
2. Embed Accountability in Term Sheets
   Investors should enforce founder accountability through financial clawbacks, independent boards, and strict ethics provisions.
3. Protect Whistleblowers and Employees
   Strengthen whistleblower protections under the Companies Act or through startup-specific rules so insiders can safely expose misconduct.
4. Rethink Media Narratives
   The media must balance inspiration with investigation. Hero worship without scrutiny only perpetuates excess.

Governance is not the enemy of growth—it is the foundation of sustainable success.

The Reckoning Before Renewal

India’s startup story is far from over, but it stands at a decisive moment. The same ecosystem that once symbolized possibility now faces a moral and structural reckoning.

The  OYO controversy proved that public accountability works, but reform should not depend on outrage. For India to lead the world in innovation, it must pair ambition with integrity and growth with governance.

The next chapter of India’s startup journey will not be written by those who scaled the fastest—but by those who built the most responsibly. Solving India’s startup ecosystem governance crisis is not just about saving startups—it’s about saving the spirit of Indian innovation itself.