India’s startup ecosystem is witnessing its toughest test yet. According to Tracxn data shared with Financial Express, 11,223 startups have shut down in 2025 (YTD) — a sharp 30% increase from 8,649 closures in 2024. And it’s only October.
Earlier this year, a Bengaluru-based logistics startup sent a short, two-line email to employees with the subject line: “Winding Down.” After four years, three pivots, and two bridge rounds, the founders finally called it quits — out of funds, and out of patience. Their story mirrors thousands across India.
The Sectors Most Affected
Data from Tracxn paints a clear picture of where the crisis is most visible:
- B2C E-commerce: 5,776 shutdowns
- Enterprise Software: 4,174 shutdowns
- SaaS (Software as a Service): 2,785 shutdowns
“This trend highlights the challenges startups face in achieving product-market fit and building sustainable business models,” said Neha Singh, Co-Founder of Tracxn. “High customer acquisition costs, limited revenue visibility, and funding constraints remain key pain points — especially for consumer-facing businesses.”
Once celebrated as the heart of India’s startup revolution, B2C e-commerce now accounts for more than half of all closures — a model stretched thin by discounts, cash burn, and investor fatigue. Even enterprise tech and SaaS, once considered safer bets, are struggling as tighter corporate budgets hinder long-term contracts.
The Funding Winter Deepens
The contrast from 2020 is stark. Back then, venture capital flowed freely, allowing founders to experiment. In 2025, that luxury is gone.
Seven startups folded within a year of inception this year — compared to just one in 2024 — showing failures are happening earlier than ever before. Seed investors now demand solid proof of traction before signing cheques.
Nithin Kamath, Co-founder and CEO of Zerodha, reflected on X (formerly Twitter):
“When we started Zerodha in 2010, ‘VC’ was an exotic term. Today, the ecosystem is mature, with interest shifting from e-commerce and fintech to deep tech. But expectations for traction and market validation are far higher.”
Beyond the Headlines
Beyond e-commerce and SaaS, several other sectors are facing rising attrition:
- Fashion Tech: 840 closures
- HR Tech: 846 closures
- EdTech / Education IT: 549 closures
Many of these companies built products in search of a problem, misreading customer needs and purchasing power in a tighter, post-funding-boom reality.
A Painful but Necessary Reset
While the numbers are alarming, they also signal a recalibration of India’s startup ecosystem — from chasing valuations to building viable, profitable businesses.
The journey ahead may be leaner, but perhaps also more sustainable.
