India’s startup boom hides a leadership crisis: Why mindset, metrics and maturity matter more than momentum

India’s startup ecosystem has come a long way. As of June 2024, it had 140K startups, making it the third-largest startup hub globally. Since 2014, these ventures have collectively raised $150 billion in funding, with 120 unicorns alone accounting for more than $100Bn. The trajectory remains bullish: by 2030, the number of startups is projected to nearly double to 240K startups, with the number of unicorns expected to be 2.5x, reaching about 280 by the end of the decade.

And some of these companies are no longer just domestic success stories. They are building globally competitive businesses across sectors like E-commerce, FoodTech, and EnterpriseTech — signalling India’s growing credibility on the world stage. With a young, ambitious entrepreneurial culture driving momentum, the narrative looks impressive on the surface.

But the scale is not the same as depth. Beneath the funding charts and startup showcases lies a troubling reality: a severe leadership talent crunch. The problem is not rooted in individual capabilities alone. It stems from the very system that produces and rewards the leaders — a system that, despite its momentum, is not built to nurture visionary, grounded, long-term thinkers capable of building enduring enterprises.

This is the M3 crisis: a gap in Mindset, Metrics, and Maturity, the core fabric that true leadership is built on.

Innovation that misses the mark

Many Indian startups are quick to follow global trends rather than innovate for India’s unique context. The ecosystem is crowded by “me-too models” rather than deep-tech or IP-driven innovations. Yet, a large chunk of venture capital is also directed toward these Western replicas — food delivery, mobility, fintech — without deep customisation for Indian problems.

True innovation in India means taking on the underserved, deeply local issues — multilingual education, rural financial inclusion, and affordable healthcare. These are not glamorous problems. They are messy. They require empathy. And they demand leaders who can look into the everyday life of the diverse Indian consumer rather than dipping into the polished pockets of its “Californian economy”.

Until leaders begin designing for India’s complexities (and not just for English-speaking urban elites), we will continue to miss out on building impactful, homegrown solutions. Though there are a few examples in this league, the needed momentum is lacking.

Lack of a global product mindset

India has no shortage of tech talent, but too few startup leaders build with a global lens. The ambition to scale internationally is often missing or comes too late. This results in products that perform well locally but lack the robustness, compliance, or user-centric design needed for global markets.

We have missed several buses of innovations in areas like platform-level OS, EV, Solar, AI, and LLMs. True leadership calls for more than technical competence; it requires market vision, cultural intelligence, and the ability to anticipate how global trends will evolve.

This is especially true for Indian SaaS and AI founders, who must compete in mature, buyer-driven ecosystems abroad. And yet, our capital markets remain risk-averse. Despite hosting 1,700 Global Capability Centres employing more than two million people, India still underfunds its high-potential ventures.

Short-term thinking and the celebration of the wrong metrics

A big part of the problem in India’s startup narrative today is the celebration of vanity metrics. Fundraising rounds, sky-high valuations, and unicorn tags are treated as finish lines. In reality, these should be seen as milestones and tools, not trophies. The obsession with “raising the next round” has created a culture where founders are optimising for investor excitement, not customer value or product excellence. This misalignment stifles long-term thinking and encourages shortcuts, often at the expense of culture, governance, and innovation.

We are celebrating too early and too often. And in doing so, we are building momentum without direction. Founders are pushed to perform for headlines, not for history. But that mindset is slowly being called into question. “Growth at all costs” is no longer a badge of honour. Investors are now asking harder questions around sustainability, profitability, and unit economics, and the consequences of short-termism are becoming harder to ignore.

In 2024, the startup ecosystem experienced a sharp funding correction following the pandemic-driven boom, a sobering reflection of just how fragile the hype cycle can be. A Longhouse report analysed that nearly half of all startup funding since 2016 was concentrated in just two years (2021 and 2022), with a pronounced decline in 2023 and 2024. This correction led to valuation resets, with at least 13 startups losing their unicorn status, spotlighting the volatility and risks inherent in the ecosystem’s rapid growth.

Investor quality and the time horizon problem

The issue, however, does not stop at the founders. The investor ecosystem in India is equally due for a serious evolution. While capital is more accessible than ever, the quality of capital — especially in terms of mentorship, strategic depth, and patience — is often lacking. Investors operate on 7–8-year fund cycles, looking for exits within that period. But building a great company takes a decade or more. It takes 10–15 years for a startup to go through 2–3 business cycles, mature its leadership team, and achieve enduring product-market fit. Companies like Infosys, TCS, or even Amazon and Apple were not built overnight.

Moreover, many investors today come from management consulting or finance backgrounds with limited operational or entrepreneurial experience. What India needs is a new generation of venture capitalists — seasoned business builders who have scaled companies, managed crises, and built from scratch. That shift will not happen passively. It must be intentional.

Governance, frugality, and operational excellence

True leaders are forged in adversity. In the Indian context, this means being able to do more with less. Operational excellence, strong governance, ethical leadership, and financial prudence are all critical yet often overlooked. Many startups today have weak internal controls and immature management layers. Leadership, in this setting, gets defined by charisma rather than competence. But building an institution requires clarity, discipline, and long-term thinking — qualities that must be deliberately cultivated.

Education, mindset, and the problem-solving deficit

Part of the problem begins earlier — in the way we educate. India’s academic system has historically prioritised rote learning and conformity over problem-solving and creativity. The result is a generation of entrepreneurs who know how to code and execute but struggle with original thinking, building teams, and navigating ambiguity.

Until our education system and the broader culture start rewarding curiosity, resilience, and independent thinking, we will keep producing executors, not leaders.

Policy paralysis and market gaps

For all the progress in startup regulation, government policies remain a structural bottleneck.  While reforms are underway, they continue to lack clarity, speed, and transparency. Tax rules, funding regulations, and licensing norms are often ambiguous and inconsistent, especially for startups. The conservative mindset of regulators further slows down innovation.

In the SaaS space, India also lacks a mature buyer market, making it difficult for startups to scale domestically. Without strong demand and predictable policy, even promising startups can falter, not for lack of ideas, but because the system does not support risk or reward endurance.

Nevertheless, supportive government initiatives like Startup India have helped foster the creation and scaling of startups across sectors, contributing to job creation and economic development. The abolition of the angel tax on startup investments in July 2024 has improved the investment climate, but bureaucratic inefficiencies and delays in approvals remain major pain points.

Calls to digitise and streamline processes using technologies like blockchain for transparency and fixed timelines are gaining traction. However, infrastructure deficits, especially in Tier 2 and Tier 3 cities, continue to hamper logistics and operational efficiency.

It takes a village to build great leaders

Leadership does not grow in isolation. It takes an entire ecosystem — investors, mentors, institutions, media, and government — to create the conditions where leaders can thrive. Investors must go beyond money and provide strategic guidance with patience. Educational institutions must prioritise creativity, innovation, and collaboration. Policymakers must foster clarity, speed, and openness to experimentation. The media must shift focus from valuation hype to real value creation. And most importantly, founders must be encouraged — and equipped — to think long-term.

Reframing the goal

While India does need more unicorns, more than that, it needs more lasting institutions. Companies that survive not just a funding cycle but multiple market cycles. Companies that do not just chase valuation but create enduring value.

Solving the leadership talent crunch will not happen overnight. It requires a fundamental shift in how we define success, where we invest our time and capital, and who we celebrate. Until then, we risk building castles on sand. The potential is massive, but we must build it right.

(Anshuman Das is the CEO and Founder of Bengaluru-based executive search and talent advisory firm Longhouse)