India’s Startup Reality Check: When Insolvency Becomes Part of Maturity

In the past decade, India has transformed into one of the world’s most exciting startup ecosystems. Unicorns multiplied, foreign investors poured in billions, and founders disrupted sectors from education to mobility to e-commerce. The 2010s largely celebrated the glitter and growth—valuation milestones, mega fundraises, and market expansions that placed Indian startups firmly on the global map.

But as the ecosystem matures in the 2020s, another side of the story is becoming visible: insolvency proceedings. Far from signaling a slowdown, this development reflects a natural stage in a growing economy. Just as Silicon Valley has seen its share of spectacular collapses, India too is now facing the reality that not all startups make it to the finish line.

This isn’t bad news—it’s a sign that India’s entrepreneurial landscape is evolving. For every success, there will be failures, pivots, and corrections. And in those corrections lie valuable lessons for founders, investors, and policymakers.

Indian Startups Who Fell Into Insolvency

Dunzo: The Poster Child of Quick Commerce

At its peak, Dunzo was almost a verb. Need groceries, forgot your charger at the office, or want medicines at midnight? Just “Dunzo it.” Backed by Google and Reliance, with quirky marketing campaigns and celebrity associations, the startup symbolized urban India’s hyperlocal convenience.

But behind the colorful app notifications was a tough business reality. The quick-commerce push, dark-store expansion, and expensive marketing deals—including an IPL sponsorship—drained its coffers. By FY23, Dunzo’s losses had crossed ₹1,800 crore. Salaries were delayed, vendors went unpaid, and several co-founders quietly exited.

By January 2025, the app went offline. Creditors, including Google India and Meta, filed insolvency pleas. The NCLT admitted the case. For small vendors and employees, the fallout was immediate; for the ecosystem, it was a reminder that customer delight must eventually meet sustainable economics.

Byju’s: From Edtech Glory to Governance Woes

If Dunzo’s insolvency was a shock, Byju’s collapse was a jolt. Once valued at $22 billion, Byju’s wasn’t just India’s biggest edtech—it was the world’s. During the pandemic, millions of students studied on its platform, making it a household name.

But the company’s growth came with overreach. An aggressive acquisition spree, coupled with opaque accounting practices, created cracks. U.S. lenders accused Byju’s of loan misuse, and at home, teachers, vendors, and employees complained of delayed payments.

By late 2024, founder Byju Raveendran admitted the company was “worth zero.” Insolvency proceedings soon followed. For India, Byju’s is less a story of edtech failure and more a governance wake-up call. Education remains a massive opportunity—but transparency and accountability will define the winners.

BluSmart and Gensol: EV Dreams in Court

India’s EV wave had its own poster child: BluSmart Mobility, which promised clean, reliable electric cabs. Incubated by Gensol Engineering, BluSmart gained traction as a green alternative to Ola and Uber, raising capital from BP Ventures and others.

But in 2025, both companies faced insolvency proceedings.

• BluSmart was admitted into NCLT over a relatively small ₹1.28 crore default linked to governance lapses.

• Gensol faced a much bigger challenge when IREDA filed a plea over a ₹510 crore default.

This wasn’t a failure of EV demand—it was a capital and governance challenge. The lesson? India’s clean-tech transition is real, but building sustainable businesses in this space requires patience, strong controls, and not just hype.

GlobalBees: The Roll-Up Bet That Unravelled

The “Thrasio model” was once the hottest buzzword in venture capital. GlobalBees, backed by FirstCry, was among the leaders—rolling up multiple D2C brands under one roof with the promise of scale and synergy.

But by 2025, cracks appeared. Kuber Industries filed for insolvency against GlobalBees, citing unpaid dues of nearly ₹65 crore. While the company contests the claim, the case highlights the risk of debt-driven roll-up models. Building brands takes time and consumer trust, not just acquisitions and spreadsheets.

Builder.ai: When AI Hype Met Reality

With AI dominating global headlines, Builder.ai seemed perfectly timed. Its pitch—“building an app should be as easy as ordering a pizza”—won backing from SoftBank, Microsoft, and other big investors. Valuations soared to $1.7 billion.

But rapid growth hid operational strains. By 2025, the company itself filed for insolvency amid governance concerns and a capital crunch. For India’s AI story, it’s less about disillusionment and more about recognizing that tech dreams must be matched with operational depth.

Patterns Emerging

Looking across these insolvency cases, some patterns stand out:

• Aggressive scaling without profitability (Dunzo, Byju’s).

• High dependence on debt and investor capital (GlobalBees, Gensol).

• Governance and compliance gaps (BluSmart, Byju’s, Builder.ai).

• Sectoral hype cycles—quick commerce, edtech, AI, EVs—that encouraged unsustainable risk-taking.

But equally important is what these patterns do not mean: they do not mean India’s startup story is fading. Instead, they show the ecosystem passing through a maturity curve, where failures are as integral as successes.

A Sign of Maturity, Not Decline

For founders, insolvency cases underline the importance of balancing growth with governance. For investors, they mark the end of the “spray and pray” era and the beginning of sharper diligence. For policymakers, they highlight the need for frameworks that encourage risk-taking while protecting employees, vendors, and creditors.

In global startup hubs, high-profile failures have long coexisted with groundbreaking successes. India is now reaching that stage. The fact that insolvency proceedings are happening openly, under legal frameworks, is itself a sign of institutional maturity.

As one investor told TICE, “The fact that startups can go through insolvency, restructure, and come back stronger is actually a good thing. It shows we are becoming a real market.”

India’s startup ecosystem is still booming. Unicorns are being minted, capital is flowing, and innovation is thriving. At the same time, high-profile insolvencies are giving the ecosystem a reality check—reminding everyone that failure is part of the journey.

This isn’t the end of India’s startup dream. It’s the ecosystem growing up.