Startup Layoffs Spike as Funding Slows in Q2
India’s startup ecosystem, once flush with capital, is now facing the brunt of a global funding slowdown. In Q2 2025 alone, over 3,500 employees have been laid off across startups, according to data compiled by Tracxn and Inc42.
Where the Cuts Are Happening
Mid-stage startups — those in Series B and C — account for nearly 70% of the layoffs. Key sectors affected include:
- Fintech: BNPL players and neobanks have downsized due to rising NPAs and RBI's regulatory tightening.
- Logistics & Mobility: Decline in GMV post-festive season and reduced subsidy inflows have impacted scale-ups.
- Edtech: The sector continues its post-pandemic correction, with even Tier-1 players opting for multiple layoff rounds.
Investor Sentiment Shifting
VCs are increasingly urging startups to focus on profitability and runway. Gone are the days of growth at all costs. “We're in an era where the next funding round is not guaranteed,” said a partner at Lightspeed India.
Bridge rounds, down rounds, and structured equity deals are becoming more common. Startups with healthy unit economics are emerging as survivors.
Talent Fallout
The talent market is also experiencing churn. While hiring freezes dominate, sectors like AI, SaaS, and cybersecurity are still recruiting selectively. Former unicorn employees are increasingly opting for global remote roles or exploring bootstrapped ventures.
What It Means
Experts believe this correction — while painful — is healthy. “It’s a necessary reset,” said a founder-turned-angel investor. “Startups will now be built with stronger fundamentals, not vanity metrics.”
With Q3 expected to bring further capital tightening, Indian startups are entering a phase that could define their long-term sustainability — and relevance.