Disclaimer: The story published on 24 October 2025 has now been updated after Tracxn, a market intelligence platform, retracted its data. Tracxn has since clarified that the data reflected an initial variation identified during an internal review, and the information has now been revalidated and updated.
“The data shared by our PR agency reflected an initial variation (identified during a subsequent internal review); this information has since been revalidated and updated to ensure Tracxn’s commitment to the highest standards of accuracy, transparency, and integrity across all its communications,” a Tracxn spokesperson said.
In February this year, a Bengaluru-based logistics startup quietly sent a two-line email to its employees. The subject line read: “Winding Down.” After four years, three pivots, and two bridge rounds, the founders decided to call it quits. Their story is familiar, but this year, it’s less frequent.
According to corrected data from Tracxn, 724 startups shut down in 2025 (till October), down sharply from 3,903 closures in 2024. Cumulatively, 53,875 Indian tech startups have folded over time, but analysts say the steep decline in annual closures reflects a maturing market, one where founders are making fewer rash bets and investors are enforcing stronger discipline.
“Many startups in this space enter crowded markets with similar offerings, making it difficult to capture and retain users. Limited differentiation in content, delivery, or engagement models often leads to high churn.” Neha Singh, co-founder, Tracxn, said.
Sectors under pressure
Despite the overall slowdown in shutdowns, certain sectors continue to feel the heat. K–12 edtech led the list with 45 closures, followed by Internet-first media (41) and continued learning (39). HR tech (34), local services (33), and fashion tech (27) were close behind, while online grocery and healthcare booking platforms each saw 25 companies wind up operations.
These are categories that flourished during India’s pandemic-era funding surge. But as competition deepened and user acquisition costs soared, many companies struggled to sustain growth.
Why fewer are failing
The trend may reflect a change in the way the ecosystem itself is operating. According to Tracxn’s data, it is not funding that is the problem; it is inefficiency in their operations and regulatory challenges that are causing startups to fail. Startups operating in heavily regulated industries, like education or healthcare, frequently get there due to compliance and regulatory reasons. Some others cannot get beyond their pilots due to bad product-market fit and limited differentiation/space.
The data suggests that India’s startup ecosystem is no longer in freefall but in correction mode. The hypergrowth phase, defined by speed and spending, is giving way to a more measured approach where sustainability outweighs blitzscaling.
“Survival in India’s startup ecosystem increasingly depends on strong product differentiation, validated demand, and cost discipline,” Singh said. Startups that prioritise fundamentals over flashy growth metrics, she added, are far better equipped to withstand funding fluctuations.
With fewer shutdowns, more cautious scaling, and a sharper eye on profitability, the ecosystem seems to be trading speed for substance.