India’s startup ecosystem is witnessing a fresh wave of public listings, with companies such as Lenskart, PhysicsWallah, OneEMI, Groww, Sedemac Engineering, Shadowfax, and Fractal Analytics having gone public over the past few months, while firms including Zepto, Flipkart, and Oyo prepare for their market debut.
But unlike the euphoric startup IPO wave of 2021, when internet companies listed amid abundant liquidity and aggressive growth projections, investors are now approaching new-age businesses with far greater caution. After the mixed post-listing performance of companies such as Paytm, Policybazaar and Nykaa, public-market investors are increasingly focusing on profitability, governance, cash burn, unit economics and long-term sustainability rather than growth alone.
The shift reflects a broader transformation underway in India’s startup funding ecosystem, where easy private capital is giving way to stricter public-market discipline, deeper domestic investor participation and more selective funding patterns.
Domestic capital plays a larger role
Another major change is the growing role of domestic capital in India’s startup ecosystem. A report by global consulting firm Uniqus showed that domestic institutional investors (DIIs) overtook foreign institutional investors (FIIs) in Indian equities for the first time in 2025, with DII holdings reaching ₹72 trillion compared with ₹70 trillion for FIIs.
Domestic mutual funds are also increasing exposure to new-age technology companies. According to shareholding pattern analysis reported by The Economic Times, mutual fund holdings in startup firms nearly doubled year-on-year to ₹1.77 trillion by the end of 2025 from around ₹95,000 crore a year earlier.
These institutions increased holdings in companies such as Eternal, Swiggy, Nykaa, and PB Fintech, while also participating in firms like Lenskart, Groww, Meesho and PhysicsWallah ahead of their public-market plans.
The broader takeaway is that India’s startup ecosystem is not becoming less active, but more disciplined. Capital has not disappeared from the market, but investors are no longer rewarding growth without visibility on profits, governance, and long-term sustainability.
Startup funding, exits evolve as investors demand profitability discipline
As startups increasingly tap public markets, investors are becoming more selective and demanding clearer paths to profitability than during the 2021 boom
Source: Business Standards
