Daybreak - Why VCs love founders with baggage more than founders with new ideas

Episode Date: August 17, 2025

India’s startup boom has lost its spark. Venture capital funding in the first half of 2025 dropped to just $3.6 billion—the lowest since 2016. Fresh ideas are scarce, and investors are stuck with fewer bets to make.So who’s still getting the money? Familiar founders. Even those with messy track records. Pharmeasy’s co-founders, whose healthtech giant crashed from $5.6 billion to $460 million, raised fresh funds for All Home. Whitehat Jr’s Karan Bajaj, criticized for misleading ads, secured $16 million for his new venture.Why are VCs are backing baggage over breakthroughs? Tune in.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. A sustainable packaging maker, an app for stock trading, a lab grown diamond brand, and even a co-living provider. On the surface, India's venture capital scene still looks alive. Deals are happening, VCs are still finding companies to fund and startups are raising money. But take a closer look and the final details tell you a different story.

Because the truth is that the industry is close to hitting a wall. Let me give you some data to back that up. In 2024, Indian venture capital funds raised a third less from their investors compared to the year before. Only four VC firms managed fundraisers of $100 million or more. And the year before that, this number was 10. And when it comes to actually investing all of this money, things are even worse. In the first half of this year, VCs just put $3.6 billion into Indian startups. And that is the lowest since 2016 and also quite a far cry from the frenzy of 2021 and 2022.

So what do investors do when they're under pressure to place bets, but the pipeline of new ideas has run dry? They turn to familiar faces. Repeat founders or entrepreneurs who've already been through the cycle before. Some with big wins behind them and others with messy histories and sometimes both. Because in times like these, the calculation shifts. The risk is not just in backing the wrong founder, it is also in missing out on the next quick exit. So here is the uncomfortable question for today. If Indian venture capital is running out of

fresh stories, are investors being forced to recycle the old ones, no matter how checkered they are? Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nidha Sharma, and I don't chase the new cycle. Instead, every day of the week, my colleague Rahil Filippoza and I will come to you with one business story that is worth understanding and worth your time. Today is Monday, the 18th of August. In late June, three of Farm Easy's co-founders, Dharmel Shet, Dharthal Shah and Hardik Dedia, were back in the game. They raised an undisclosed amount for their new venture, an interior design

services startup called All Home. Investors included Bessemer venture partners and the company was valued at $120 million. Now, as most of us know, Farm Easy itself is a story of boom and bust. At its peak, it was valued at. at nearly $6 billion and came close to going public. But by December last year, one of its investors marked it down to just $460 million. And worse than the collapse in value were the reports of the company misselling medicines which were documented by the Ken. And yet, here were its founders raising money again. Now, this is not just an isolated case. Do you remember Whitehead

Jr.? The coding tutorial company blasted across India with aggressive ads and claims that critics called misleading. Its founder Karan Bajajh faced a lot of backlash, but recently he raised $16 million for his new startup called Compliment One, which focuses on lifestyle modification for cancer patients. The backers this time include Bloom Ventures and Owl Ventures. The funding made Compliment One one of the most valuable seed stage companies around. So why would investors jump in again?

One word. Exits. Bajaj had delivered before. He sold White Hat Jr. to buy Jews in 2020 less than two years after founding it for $300 million. His investors made a fortune. Nexus Venture partners booked four times return. Owl Ventures walked away with over 10 times and now Owl is back betting on him again. So what is the lesson here?

That venture capital is not just about whether a company succeeds in the long. run. It is about whether you as an investor can get out in time. That is why even spectacular flameouts like Bayju's are not cautionary tales for everyone. At its peak, Bayju's was valued at $22 billion. Now it is essentially worthless. But some investors cashed out before the fall. Times Internet reportedly made 10 times its money. Peak 15 partners, also then called Sequoia, India, sold its share early enough to make seven times the returns. And the same game played out at Oyo as well. In 2019, both Peak 15 and Lightspeed venture partners sold part of their stakes to founder

Ritesha Garwal. Lightspeed made 35 times. Peak 15 made 20 times. Oyo has stumbled since with three failed attempts to go public, but those investors were already long gone. In today's market, where fresh ideas are also. scares, old faces and their proven ability to generate early exits looks like the safest bets left. But those bets don't always work out. For more on this, stay tuned for the next

segment. Take Blue Smart Mobility, the electric ride hailing startup. Its co-founder's brothers Punit and Unmol Singh Jaggi also ran Jensol engineering. Within months of launching Blue Smart in 2019, they took Genzole public. And that move should have made in investors cautious. Mutual funds avoided Genzole, but not Blue Smart's backers. Even energy giant BP came on board and the red flags kept piling up. In late 2023, Genzole announced that it would build a two-door two-seater EV, a claim that seemed far-fetched even then. But instead of walking away, investors doubled down. In March 24, the Ken flagged irregularities in Blue Smart's car leasing agreement with Gensol. Just three months later, Blue Smart raised another $24 million. But by April

2025, the truth came out. Sebi reported that the Juggie brothers had diverted funds from Gensol for personal use. And what happened to the supposed EV factory near Pune? Inspectors found that only two or three labourers were on site and there was no manufacturing happening at all. Farm Easy story also shows how messy these beds can get. Over the years, it merged with Medlife, bought diagnostics company ThiroCare, an acquired hospital supply chain startup called Atnamet. Now, to fund the 4,500-c-curoc Thair deal in 2021, Farm Easy borrowed from Kotak Mahindra Ban. And to repay Kotak, it borrowed again from Goldman Sachs.

And when it struggled to repay Goldman, billionaire Ranjan Pai stepped in with an 800-crow-ru-rupy lifeline in 2023 at a valuation down 90% from its peak. Meanwhile, Pai's co-investors at 361 asset backed Mekko, a chain of dental and dermatology clinics. And one of its founders is Arpi Mehta, who is the wife of Farmeasy CEO, Siddharth. But Meko's valuation has also halved dropping from over 2,000 crore rupees in 2024. And then there is Rahul Yadav. He clashed with investors at his first startup housing. and was eventually fired in 2015.

His second company, 4B Networks, raised $290 crores from Info Edge. By 2023, InfoEge had written off the entire investment and even filed a criminal complaint against Yadav and other executives, accusing them of misusing funds. Patterns like these should make investors vary. But the reality is that they often don't walk away. Because in a market starved of fresh opportunity, a founder with baggage can still look like a better bet than no founder at all.

And that is the paradox of Indian venture capital right now. Even when the past screams caution, the present keeps pushing investors to roll the dice again. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature story. newsletters and podcast extras.

To subscribe, head to the ken.com and click on the red subscribe button on top of the Ken website. Today's episode was hosted by Snigda Sharma and edited by Rajiv CN.