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As 2025 draws to a close, India’s startup ecosystem is showing clear signs of consolidation rather than exuberance. Not only has the number of startups shutting down fallen sharply, the pace of new company creation has also slowed — underscoring a shift toward caution and maturity after the post-pandemic boom.
Data from market intelligence platform Tracxn showed that just 729 startups closed operations in 2025 year-to-date, the lowest level in five years and an 81 per cent drop from nearly 3,900 shutdowns last year. At the same time, new startup formation declined steeply, reflecting tighter capital, stricter investor scrutiny, and founders choosing sustainability over rapid, cash-fuelled scaling.
According to industry experts, the numbers reflected the ecosystem maturity where founders and investors have become more disciplined and cautious.
Shailesh Haribhakti, a management expert, said that many startups, which were founded during the pandemic boom, were built on rapid scaling and the assumption of endless capital. However, on the back of tightened funding and market corrections, several startups had to cease operations.
“We are a maturing economy. The founders are learning to fail fast and move on. The data tells us that there is a maturity, which is creeping into the whole sector, and people are not assuming that they will be given the right and permission to burn cash, and so they are more careful. The other way to look at it is that people have become so much more careful in choosing their business models and the problems, and that’s also a driver of better outcomes,” Haribhakti said.
“The startup closures in 2025 can be attributed primarily to continued capital tightening, along with more rigorous investor discipline, or the various sector-specific operational challenges. However, there has been a marked decrease in the number of startups closing down since 2020, and this downward trend reflects the ecosystem’s gradual adjustment to current market expectations, with founders focusing more on disciplined spending, operational efficiency, and clearer pathways to profitability,” Neha Singh, co-founder of Tracxn, added.
The shutdowns also coincided with the decline in the number of new startups being established. Around 19,000 companies were founded in 2020; however, the number shrank to 978 in 2025, which is also a sharp reversal from the mass startup openings seen in the pandemic period. While the data may signal worry, experts mention it means greater prudence. In all, there are currently over 200,000 startups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT).
Top categories witnessing closure
The sector-wise breakdown of the deadpooled startups showed that the enterprise applications category has recorded the highest number of shutdowns, followed by retail and edtech. Industry experts said that these sectors attracted a flood of entrepreneurs during the pandemic years, underestimating the difficulty of sustaining scale.
Srinath Sridharan, policy researcher and corporate advisor, noted that enterprise solutions can be a tough business, as it depends dominantly on quickly scaling the business. “The concept of early-stage and private investment in India has been maturing. Take, for example, enterprise software. There were companies like Freshworks, which got listed once they scaled, but if companies are not able to achieve proof of concept and other things, they don’t get funded,” he said.
Speaking on edtech and retail being among the top three categories where startup shutdown has been the highest, business strategist and angel investor Lloyd Mathias said, “Edtech is clearly a result of the post-pandemic scenario, and there was a huge surge of learning online. There were companies like BYJU’s, Udemy, and EduGorilla, and each one of them was having a great time. Post pandemic, there was a realisation that education cannot happen only online and therefore edtech saw big rationalisation.” He added that retail has been disrupted by the rapid rise of quick commerce: “Retail is a deep, long-term investment business with massive cash burn.”
B2C category heavily impacted
Although there have been notable closures across both business-to-business (B2B) and business-to-consumer (B2C) domains, consumer-focused companies consistently face over 50 per cent more closures compared to their B2B counterparts. Since 2020, nearly 14,000 B2C startups have shut down, about 72 per cent more than B2B closures in the same period.
Reflecting on this trend, the Tracxn cofounder quoted above said, “The higher closures witnessed in B2C ventures are driven by various challenges such as high customer acquisition costs, lower customer retention, and business models that are more dependent on capital infusion. B2B startups tend to be more resilient due to more predictable and recurring revenue, better unit economics, and higher margins. B2C startups that are heavily reliant on burn and operate on thin margins are more vulnerable to shutdowns.”
Experts mentioned that the country can expect fewer closures in the near future as the startup ecosystem continues to mature at a significant pace. Notably, moderation is also visible in unicorn creation. India minted 11 unicorns in 2025, a rebound from just two in 2023 but well below the record 45 seen in 2021.
To this trend, Haribhakti added that not every startup needs to be a unicorn and that the long-term sustainability of companies holds more importance.
