Over the next two years, most early-stage startups in India expect to break even, while several late-stage firms have already turned profitable, according to a recent survey by venture debt firm Innoven Capital.
The survey, which covered over 100 founders across sectors, underscores a trend reversal over the past 12-18 months. Investors are placing a premium on sustainable business models and healthier unit economics (also known as getting more bang for the buck), pushing even fledgling startups to prioritize profitability over rapid expansion.
Of the startups surveyed, 28% were early-stage businesses, while the rest were growth and late-stage firms.
“While the bias for profitability vs growth was more prominent in late-stage companies, even early-stage startups are more cognizant of keeping a balance between growth and cash burn,” Ashish Sharma, managing partner at the venture debt firm, told Mint in an interview. “There is a realization that investors have gravitated towards more sustainable business models.”
Post-pandemic market reset
The correction follows a period of soaring valuations during the pandemic when capital was abundant. With the funding boom tapering off, startup founders and investors are reassessing their approach.
According to the survey, 41% of startup founders reported being Ebitda (earnings before interest, taxes, depreciation, and amortization) profitable, up from 30% a year earlier. The shift is particularly evident in direct-to-consumer (D2C), logistics, and business-to-business (B2B) sectors, though artificial intelligence (AI) remains an exception, as investors in the space continue prioritizing growth over immediate profitability.
The cooling of private markets has prompted startups to rethink liquidity options. With venture capital and private equity investors becoming more selective, more companies are looking to the public markets.
“Since the post covid funding boom ended, we have seen a slower funding environment over the last couple of years, but the silver lining has been the opening of capital markets, which enabled several late-stage startups to IPO,” Sharma said. “It’s now well understood that endless private capital is not available and the best path for liquidity will be through an IPO (initial public offering), which needs a different financial architecture oriented towards a stable business model and profitability.”
Also read | Market meltdown may cut startup IPOs and valuations down to size
He explained that companies aiming to go public must demonstrate a predictable business model with Ebitda profitability or at least a clear path to profitability—even in high-growth sectors like quick commerce. “As a result, investors are increasingly preferring companies that have healthy unit economics and profitability, even if it comes at the expense of slightly lower growth.”
Ebitda, or earnings before interest, taxes, depreciation and amortisation, is a key measure of operational efficiency.
The Innoven survey found that 73% of startup founders now see an IPO as their preferred exit route, up from 64% in 2023. Enterprise SaaS and fintech firms are particularly bullish on public listings, while consumer companies continue to weigh mergers and acquisitions or secondary sales as alternative exit strategies.
Also read | Small investments surge as new wave of angel investors enters the startup scene seeking lucrative returns
Changing investor expectations
As the funding environment remains sluggish, startups are adapting to new valuation realities. Growth and late-stage firms are increasingly facing flat or down rounds, while those that secured sky-high valuations at the peak of the funding cycle are focusing on justifying them through cost-cutting and improved profitability.
“Over the last two years, several companies such as Bluestone, Infra.market, Ather and Boat have made rapid strides by shifting their focus towards cutting burn and improving profitability to justify the valuations that they prescribed earlier,” Sharma said.
In other examples, Minimalist, born in 2020 amid the covid lockdowns, was laser focused on profitability before Hindustan Unilever Ltd acquired the company last month.
Wakefit, which was Ebitda-positive in its early years, returned to profitability in FY24 with an Ebitda of ₹65 crore. The home and sleep solutions startup, which had previously prioritized sustainable growth, is now doubling down on omnichannel expansion while maintaining financial discipline, co-founder and CEO Ankit Garg had said in a statement in September.
Chai Point is another example of this shift. “As a beverage platform, we are focused on quality revenue expansion…We now want our stores to be setup across 30 cities. We are Ebitda positive and are focussed on delivering cash flow positive performance in the next nine months,” founder and CEO Amuleek Singh told Mint. The company’s losses narrowed to ₹70 crore in FY23 from ₹84 crore a year earlier.
This trend underscores how even younger startups are recalibrating their strategies to strike a balance between scale and profitability in a more cautious funding environment.
Also read | Why early-stage consumer brands are increasingly foraying abroad in 2025
To be sure, while Chai Point and Bluestone were founded about a decade and half ago, most of the other startups mentioned above are nearly a decade old but aren’t yet counted among growth-stage startups given their revenue.
The wider shift towards profitability has also drawn new investors into the mix. Family offices, which have seen strong returns from recent IPOs, are playing a more active role in startup funding. Their participation has risen from 7% in 2023 to 32% in 2024, according to the survey.
For instance, Oyo-backed Innov8 recently raised ₹110 crore from a consortium of family offices, including Mankind Pharma, Gauri Khan, Rupa Group, and Jagruti Dalmia. In November, Mint reported that quick-commerce platform Zepto is in talks to secure $250 million from high-net-worth individuals and wealth management firms such as Motilal Oswal, IIFL, and InCred.
Amitabh Bachchan’s family office and Raamdeo Agrawal, chairman of Motilal Oswal Financial Services, reportedly picked up minority stake in Swiggy ahead of its public listing in November.
With more than two dozen startups, including Groww, Lenskart, and Ofbusiness, preparing to go public in the coming months, companies may have to reassess their issue sizes and valuations in light of macroeconomic uncertainties and geopolitical tensions.
“As the markets are going sideways, I think family offices’ participation might become a little subdued,” Sharma said.
Founded in 2008, Innoven Capital has invested over $800 million across 200 startups, including Ather, Captain Fresh, Zoomcar, Licious, Dailyhunt, Amaha, and Zetwerk. The firm deploys about $200 million annually in new and existing investments.
Also read | Till retirement do them part: India Inc’s new retention strategy is richer retiral benefits
