Why Indian Startups Are Chasing Profitability Over Valuation

Source Credit : Portfolio Prints

The Funding Winter and Shift in Capital Dynamics

The exuberant growth-at-all-costs era—fueled by abundant venture capital—has given way to a harsher funding environment. In 2023, Indian startups raised a mere ~$8 billion, marking a six-year low compared to the ~$36 billion of 2021.

This scarcity of capital has disrupted expectations and forced founders to rethink the “growth-first” narrative. As one founder lamented, “For five years not one investor asked me when or how we would be profitable… now every VC only asks when we will be profitable”.

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From Vanity Valuations to Real Value

The lionization of unicorn status has waned. VCs increasingly emphasize actual value creation over inflated valuations. As Inc42 puts it, “valuation only truly matters at the time of an exit, and to get this valuation, investors have to back value”.

Rather than chasing headline-grabbing valuations, stakeholders are scrutinizing unit economics, path to breakeven, and sustainable financial models.

Stronger Unit Economics and Operational Discipline

The focus has shifted to tighter cost control, customer retention, and revenue diversification. Indian startups are implementing lean operations—renegotiating contracts, automating, and optimizing—for smarter, more sustainable growth. Startups are also deepening revenue streams instead of overextending their core offerings.

The Rise of Profitability Champions

Several Indian companies are leading the profitability-first trend:

• Zerodha built a scalable, low-cost fintech model, staying consistently profitable through disciplined operations.


• Nykaa diversified into offline retail while maintaining focus on margins—culminating in a healthy position post-IPO.


• OfBusiness expanded profitably via data-driven lending to SMEs, growing both scale and value.

Founder-Led Mindset: Bootstrapping and Sustainable Growth

Bootstrapped growth offers autonomy, resilience, and long-term orientation. Companies like Zoho and Chargebee exemplify this model—prioritizing customer-centricity, profitability, and vision consistency without aggressive valuation chasing.

Market Expectations and Exit Realities

Surveys show a marked shift: by early-2024, 62% of founders prioritized profitability over growth, up from 55% in 2022.

Meanwhile, EBITDA profitability among Indian startups has climbed—41% reported profitability in a recent Innoven Capital survey, compared to 30% a year earlier.

Investors are now backing companies with clear monetization plans as they prepare for IPOs and sustainable exits.

Real-World Turnarounds

• BharatPe is now firmly on a profitability track and gearing up for a $100M funding round—a notable turnaround after earlier controversies.


• WoodenStreet, despite loss in FY24, aims to quadruple revenues while targeting profitability and considering an IPO—breaking away from the “valuation at any cost” mindset.


• Ather Energy’s tepid IPO debut—despite its technology-first appeal—signals investor wariness of unprofitable models, especially in capital-intensive sectors.

A Maturing Ecosystem

This realignment signals a deepening maturity in India’s startup landscape. Investors are now favouring sustainable returns and profitable exits over speculative valuations. The informal secondary market is emerging to provide liquidity, helping investors exit even without traditional IPOs.

In Summary

• A dramatic slow-down in VC funding has brought profitability back to the forefront.


• Investors and founders now value sustainable unit economics over vanity valuation metrics.


• Success stories like Zerodha, Nykaa, and BharatPe underscore the power of profit-first strategies.


• Bootstrapped models and focused monetization have become powerful antidotes to volatile capital cycles.


• Increasing EBITDA positivity and emphasis on real value redefine the growth paradigm.


• The ecosystem is evolving toward disciplined, long-term wealth-building rather than short-term hype.

This transformation isn't a rejection of scale—rather, it's a recalibration. It’s about building businesses that endure the storms, not just shine momentarily in the dazzling light of hype.