AI’s Transparency Crisis, Zepto CEO’s Support, and Razorpay Gets License

For the last few years, AI startups have sold opacity as a feature. If the model was too complex to explain, that was framed as sophistication. If customers couldn’t see how decisions were made, they were told to trust the outcomes. The black box wasn’t a bug. It was the business model.

That era is ending.

The lawsuit against Eightfold AI is not a niche legal dispute. It is a warning shot at the entire AI SaaS industry. The allegation, that its hiring algorithm systematically disadvantaged certain candidates, doesn’t just question bias. It introduces something far more dangerous: liability.

Until now, AI companies hid behind a convenient fiction. They sold “decision support,” not decisions. They were software vendors, not outcome owners. If something went wrong, the blame was supposed to fall on the customer, not the code.

That wall is cracking.

If courts begin treating AI vendors as active participants in decision-making rather than neutral tools, the economics of AI startups changes overnight. This is no longer about performance, but about accountability.

Indian founders should be paying close attention, because India is far more exposed than it realizes.

Across the country, startups are selling AI into hiring, lending, credit scoring, fraud detection, edtech assessments, insurance underwriting, and customer risk profiling. These are not low-stakes use cases. A biased resume screener can lock out entire communities. A flawed credit model can deny loans to millions. A poorly trained proctoring model can falsely flag students. A churn model can quietly discriminate against certain pin codes.

And yet, most Indian AI companies cannot explain their outputs.

Ask a typical Indian founder what data their model was trained on, where it came from, whether it was consented, how bias was tested, or how decisions can be audited - and you’ll get vague answers. “It’s proprietary.” “It’s too complex.” “The model learns on its own.”

That is not a moat. That is a legal time bomb.

We’ve already seen early warnings in India. Fintech startups have faced regulatory crackdowns for opaque lending algorithms. Edtech platforms have been accused of unfair assessment practices. HR-tech platforms quietly tweak models when enterprise clients complain about skewed shortlists. These are not edge cases. They are signals. And they will become lawsuits.

Global enterprises are already tightening procurement rules. They want explainability, audit logs, bias reports, fallback logic, and human override mechanisms. Indian startups selling into the US and EU will be forced to meet these standards, or be cut off.

Most will not survive that transition.

The next moat in AI will not be accuracy. It will be defensibility. Who can explain outputs in court? Who can trace training data provenance? Who can show causal logic instead of correlations?

Investors should be ruthless about this.

If your AI portfolio company cannot survive legal discovery, it does not have a moat. If it cannot explain its outputs, it does not have defensibility. If the founder says, “Trust the model,” that is not a strategy. That is a liability.

AI companies love to claim neutrality. “We don’t decide, we predict.” That is nonsense. Prediction shapes human action. A low score is a rejection. A high score is an opportunity. The math becomes the decision.

This is not about ethics. It is about power. Whoever controls the algorithm controls outcomes. And power without accountability never lasts.

The era of “move fast and break things” is officially over for AI.

The Eightfold lawsuit is not about one company. It is the industry being told: if your software decides, your software is responsible.

The black box era is ending.

Let’s go through what else is happening in Indian startup world - Grab your simmering cup of StartupChai.in and unwind with our hand-brewed memes.

“Manzoori Mil Gayi”: Razorpay Gets RBI License For Offline Payment Aggregation

Razorpay has secured the offline payments aggregator license from the Reserve Bank of India for its POS arm, Razorpay POS, marking a key regulatory milestone for the fintech major.

With this approval, Razorpay now joins a small cohort of firms holding all three critical licenses across online, offline, and cross-border payment aggregation.

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“Ye Toh Bekasoor Hai”: Karnataka HC Stays ED Investigation Against Gameskraft

The Karnataka High Court has stayed the Enforcement Directorate’s investigation against real money gaming firm Gameskraft, holding that the probe lacked legal basis after the original FIR underpinning the case was closed.

While the ED argued that six additional FIRs against the company remain and will be brought on record at the next hearing, the court flagged procedural overreach at this stage.

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“Full Sapot Saar”: Zepto CEO Aadit Palicha backs Labour Ministry’s move to remove '10-minute' delivery branding

Aadit Palicha, CEO of quick-commerce startup Zepto, has backed the Ministry of Labour and Employment’s move to remove “10-minute” delivery branding, calling it a step toward more responsible consumer messaging.

Palicha noted that such labels can create unrealistic expectations and unintended pressure across the delivery ecosystem, even when companies internally prioritize safety and compliance.

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“Hum Saath Saath Hai”: Peak XV-backed Care.fi acquires discharge automation platform Aldun

Care.fi, backed by Peak XV Partners, has acquired discharge automation platform Aldun to strengthen its end-to-end hospital payments and workflow stack.

Aldun currently enables around 10,000 monthly discharges across networks such as Apollo Hospitals, Fortis Healthcare, Manipal Hospitals and Narayana Health, and Care.fi now plans to scale the combined solution to 300 hospital units and nearly 1 lakh discharges a month.

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“Time Waits For Nobody”: Elevation Capital Partner Mayank Khanduja Steps Down

Mayank Khanduja has stepped down as partner at Elevation Capital, bringing to a close a 15-year tenure at the venture capital firm.

Khanduja said he plans to take a personal break to spend time with his family and recharge over the coming months before charting his next professional move. During his time at Elevation, he worked across consumer tech, gaming, healthcare, AI, deeptech, and advanced manufacturing.

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“Taiyyari Jung Ki”: PhonePe Files Updated DRHP For OFS-Only IPO

PhonePe has filed an updated DRHP with the SEBI for an IPO that will be structured entirely as an offer for sale, with no fresh issue component.

The Bengaluru-based fintech’s shareholders plan to offload up to 5.06 Cr equity shares through the public listing. Promoter WM Digital Commerce Holdings along with investors Tiger Global and Microsoft are set to pare their stakes via the OFS route.

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1. EV Startup Chargeup has raised ₹22 Cr in a funding round led by IAN Group, with participation from Capital A and existing investors. The fresh capital will be used to expand into high-demand markets and strengthen its tech platform for drivers and NBFC partners, building on its last $7 Mn raise.

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2. 360 ONE Asset has launched a multi-stage early-stage VC fund focused on defence tech and spacetech, targeting a corpus of ₹1,000 Cr to back deeptech startups across growth, late-stage, and pre-IPO phases. The fund plans to build a concentrated portfolio of 15 to 20 companies.

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3. Ashish Goel, cofounder and former CEO of Urban Ladder, has raised $12 Mn for his new cooling-focused startup Optimist in a seed and pre-Series A round led by Accel and Arkam Ventures, with participation from angel investors.

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4. Escape Plan has raised $25 Mn in a Series A round to accelerate its offline expansion strategy alongside its ecommerce presence. The startup plans to deploy the fresh capital toward aggressive marketing, sharper pricing, and scaling its physical retail network to over 200 stores.

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5. Kapiva has launched a ₹50 Cr innovation fund aimed at accelerating research-led product development in Ayurveda. Open for applications from today, the fund will support projects from research institutions, PhD scholars, hospitals, labs, and startups.

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6. Lorazzo has raised ₹5 Cr in a seed funding round led by Sprout Venture Partners and First Cheque, with participation from the Chandigarh Angel Network and other angel investors. The startup plans to deploy the capital to accelerate product innovation, strengthen its design and technology stack.

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7. Meine Electric has raised $750,000 (around ₹6.7 Cr) in a pre-seed funding round led by Antler and Rebalance, with participation from Venture Catalysts, gradCapital, AIC-AU Incubation Foundation, and angel investors.

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8. Dhun Wellness, founded by Mira Kapoor, has raised $4 Mn in a funding round backed by the family offices of SRF Ltd and Havells India. The round was led by Sanjay Kapoor of Genesis, with participation from Arushi Aayush Agrawal of Inspira Global and individual investors including Ash Lilani.

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