Top 10 Indian Startups That Failed or Shut Down After 2020: What Went Wrong?

Between 2020 and 2022, the funding and innovation within India’s flourishing startup ecosystem surged to unprecedented levels.  The pandemic hastened the embrace of digital practices, resulting in soaring valuations and a frenzy among investors.  However, as the dust settled in 2023 and 2024, a number of Indian startups—many of which were well-funded—either collapsed or underwent significant scaling down.

This blog examines leading Indian startups that ceased operations or failed after 2020, investigates the causes of their decline, and highlights important takeaways for entrepreneurs and investors in the constantly changing startup environment.

Related: CodeParrot Shuts Down Despite Y Combinator Support

Sector: Auto services & car repairs

Founded: 2016 | Shut down: 2023

What happened: Is GoMechanic Closed? GoMechanic exemplified India’s car servicing sector and had secured more than $60M in funding from investors such as Sequoia India.  However, in the beginning of 2023, the founders acknowledged financial misreporting and inflated revenue figures in a post on LinkedIn.

Reasons for its failure:

• Irregularities in accounting
• Deceiving investors regarding revenue
• Investor trust that has been damaged
• Ultimately dismissed 70% of its employees

Lesson Learned: Governance is just as important as growth.  In the long run, ethics and transparency are essential and cannot be compromised.

Sector: EdTech

Founded: 2019 | Shut down: 2022

What Happened: Lido Learning provided live online tutoring for K-12 students and had secured approximately $20 million in funding.  However, after funding ceased in the post-COVID phase, the company abruptly terminated operations and did not pay employees’ salaries.

Reasons for its failure:

• Accelerated spending and expansion that cannot be sustained
• Excessive reliance on demand from the pandemic period
• Inability to obtain additional financing
• Inadequate management while closed

Lesson Learned: It can be deadly to depend on short-term market trends.  Enterprises created for crises need to adapt when circumstances return to normal.

Sector: Creator economy / EdTech

Established: 2020 | Closed down: 2023

What Occurred: FrontRow provided courses in music, cricket, and comedy led by celebrities.  Even after securing around $15M from Lightspeed and Elevation Capital, it was unable to maintain traction or grow.

Reasons for its failure:

• Low rates of course completion
• Specialized product with restricted recurrent use
• Absence of revenue generation beyond content
• Laid off ~90% before shutdown

Lesson Learned: Having a well-known figure doesn’t guarantee that the product fits the market.  Keeping existing customers is more important than going viral.

Sector: Fintech – BNPL (Buy Now, Pay Later)

Founded: 2015 | Shut down: 2023

What Happened: ZestMoney was a prominent player in the BNPL sector and had collaborations with Flipkart and Amazon.  However, the discussions regarding the company’s acquisition by PhonePe did not succeed, and after key executives left, the company ultimately ceased operations.

Reasons for its failure:

• Regulatory pressures affecting BNPL
• Elevated levels of customer defaults and NPAs
• Decline in investor trust
• Unviable business approach in a high-risk segment

Lesson Learned: Financial startups need to foresee changes in regulation.  It is risky to scale credit-based products without reliable underwriting.

Sector: EdTech (early learning)

Founded: Parent Vedantu still operates

What Happened: Vedantu introduced Superkids to offer live online classes for children aged 3–8.  However, following the slowdown and increasing losses in the post-pandemic period, it closed down the division and terminated the employment of hundreds.

Reasons for its failure:

• Poor retention among younger age cohorts
• Post-2020 EdTech market saturation
• Redirecting attention to main products

Lesson Learned: Continuous engagement and differentiation are essential for EdTech.  Without a deep strategy, expansion can lead to brand value dilution.

Sector: Foodtech / Cloud kitchens

Status: Partial shutdowns, not full closure

What Happened: Rebel Foods manages several virtual brands such as Faasos and Behrouz Biryani.  In the face of pressures on profitability during 2022–24, it closed down numerous kitchens that were not performing well and put expansion on hold.

Reasons for Its Scaling Down:

• Considerable operational expenses
• Unsustainable unit economics in Tier-2 cities
• Post-COVID demand normalization

Lesson Learned: Cloud kitchens need to localize and streamline their operations. Strong hyperlocal demand is necessary for support of scale.

Sector: Hyperlocal Delivery / Quick Commerce

Founded: 2015 | Collapse: 2023–2024

What happened: With the backing of Google and Reliance, Dunzo became a trailblazer in the field of instant delivery.  By the middle of 2024, though, it had defaulted on salaries, postponed payments to vendors, and suspended services in various cities.

Reasons for its failure:

• Unmanageable burn resulting from a 15-20 minute delivery model
• Investor funding standstill
• Accruing operational losses
• Poor management and frequent changes in leadership

Lesson Learned: Rapid commerce does not guarantee rapid profitability.  Without long-term visibility, scaling can collapse under its own weight.

Sector: Lifestyle Social Commerce

Founded: 2016

What Happened: Trell enabled influencers to share product reviews in their local languages and receive commissions.  Following the fundraising of approximately $19 million, it experienced internal conflicts, departures of founders, and claims regarding mismanagement of finances.

Reasons for its failure:

• Improper use of funds
• Conflicts of leadership
• Lack of a clear path to monetization
• Did not succeed in adapting amid shifts in the market

Lesson Learned: During periods of growth and crisis, it is essential to have robust governance and alignment among founders.

Sector: Online extracurricular learning

Founded: 2020

What Happened: Kyt provided online hobby classes (such as music, dance, chess) for children.  Supported by Sequoia and Alpha Wave, it was unable to keep pace once the demand spurred by COVID diminished.

Reasons for its failure:

• Post-pandemic demand decline
• High customer acquisition costs (CAC) and low retention rates
• Poor differentiation in EdTech

Lesson Learned: Startups that arise from temporary demand surges need to pivot early on. While trends come and go, value is everlasting.

Sector: Furniture Rental

Founded: 2012 | Decline: 2022–2023

What Happened: Furlenco provided high-end furniture for rent.  It raised approximately $240 million altogether.  However, after the pandemic, consumer behavior shifted back towards ownership, and operations were affected by supply chain issues.

Why It Failed (in parts):

• Model with high logistics intensity
• High expenses for upkeep of assets
• Shifting customer preferences
• Teams were laid off and several cities were exited

Lesson Learned: Models with heavy assets come with risk when demand cycles are volatile.  Models based on rent require a robust backend and customer loyalty.

1. Pandemic Sugar Rush: Numerous startups experienced rapid growth in 2020–2021, fueled by needs specific to the pandemic. With the return to normalcy, demand fell sharply, revealing weak fundamentals.
2. Funding Winter (2022 Onward): After 2022, investors adopted a conservative approach, placing greater importance on profitability than on growth. Startups that lacked clear breakeven strategies found it difficult to secure follow-on funding.
3. Lack of Governance: Instances such as GoMechanic, Trell, and ZestMoney have underscored the detrimental effects on investor trust that can result from internal mismanagement, metric inflation, and lack of transparency.
4. High Burn, Low Margin Models: Quick commerce, BNPL, and online tuition experienced setbacks due to unfavorable unit economics. Growth at any price is no longer effective.
5. Market Saturation: The EdTech, Fintech, and delivery segments have become overcrowded. Many startups would struggle to retain users or revenue without robust differentiation.

To conclude, the surge of Indian startup failures after 2020 highlights the fact that rapid growth and substantial investment do not ensure success.  From governance lapses to unsustainable business models, these shutdowns highlight the importance of strong fundamentals, ethical practices, and adaptability.  To create resilient and impactful ventures, founders and investors must focus on long-term value creation rather than short-term hype as the ecosystem develops.