Enforcement Actions Impact Indian Startups in 2025
Intensified Scrutiny and Compliance The year 2025 saw an increase in the speed and scale of controversies impacting Indian startups, resulting in public meltdowns and significant operational disruptions. Industry Growth Amidst Challenges Despite these challenges, the Indian startup ecosystem continued to demonstrate resilience and growth in 2025. Despite these issues, the startup…
In 2025, the Indian startup ecosystem found itself under intense scrutiny as enforcement actions expanded to encompass fintech, e-commerce, and trading sectors. This heightened level of oversight significantly affected the operations of startups across the nation, with compliance becoming a central concern for both founders and investors.
Intensified Scrutiny and Compliance
The year 2025 saw an increase in the speed and scale of controversies impacting Indian startups, resulting in public meltdowns and significant operational disruptions. Compliance issues became a focal point as founders and regulators frequently clashed, leading to a series of high-profile controversies, arrests, and asset freezes. These enforcement actions highlighted the critical importance of adhering to regulatory standards and maintaining transparent business practices.
Among the notable cases, Eggoz faced significant backlash after banned antibiotics, linked to cancer risks, were discovered in their eggs. This controversy raised uncomfortable questions about regulatory oversight and product safety within the Indian startup ecosystem.
High-Profile Arrests and Legal Challenges
The year also witnessed several high-profile arrests that shook the startup community. The founders of WinZO were arrested by the Enforcement Directorate for alleged money laundering, with assets worth INR 505 crore frozen under the Prevention of Money Laundering Act (PMLA). In another development, Ankit Maheshwari, the founder of Dataisgood, was detained at an airport following the filing of a First Information Report (FIR) against the company’s founders for cheating, misuse of investor funds, and data theft. Ishir Singh, another key figure, was accused of cheating and conspiracy, with the Supreme Court mandating his surrender within three weeks.
Amid these legal challenges, Skill Arbitrage acquired Dataisgood, even as the company grappled with multiple refund claims and ongoing investigations. These incidents underscored the legal vulnerabilities faced by startups and the repercussions of financial and operational mismanagement.
Governance and Financial Mismanagement
Governance issues also came to the fore in 2025. Medikabazaar's CEO, Vivek Tiwari, accused investors of coercion, sparking a governance war between the company's founders and its investors. In a separate incident, DroneAcharya faced allegations of inflating sales figures by one-third, leading to a two-year ban on its promoters by the Securities and Exchange Board of India (SEBI) and the imposition of monetary penalties. Claims of national security risks further complicated the company's situation.
Bira 91 faced allegations of financial mismanagement, with founder Ankur Jain caught in a governance crisis. Investors claimed violations of the Companies Act, 2013, and employees alleged significant pending dues. The transition from a private to a public entity disrupted operations, highlighting the challenges associated with scaling and governance.
Industry Growth Amidst Challenges
Despite these challenges, the Indian startup ecosystem continued to demonstrate resilience and growth in 2025. The number of Department for Promotion of Industry and Internal Trade (DPIIT)-recognized startups exceeded 200,000, generating over 2 million jobs. The startup sector grew 400 times in under a decade, fueled by an active internet user base that reached 886 million.
The entertainment and e-commerce sectors saw fresh momentum and rapid expansion, respectively, contributing to the overall vibrancy of the startup ecosystem. India's exports remained robust throughout the fiscal year, and Foreign Direct Investment (FDI) inflows reached $80.6 billion. Additionally, patent filings increased by 180% over five years, with India filing 68,176 patent applications in FY25, aiming to rank among the top five in global patent filings.
These developments occurred against the backdrop of India being the fastest-growing major economy in 2025, reflecting the country's dynamic economic landscape and the significant potential of its emerging industries.
As Indian startups navigate these complex challenges, the emphasis on compliance and governance will likely continue to shape the sector's trajectory in the coming years.