The Age of Startup Reckoning, China Files WTO Complaint, and Zomato Hits Pause

India’s startup story has always run on two fuels - ambition and trust. Lately, the trust tank is flashing red. What we’re seeing isn’t random turbulence; it’s a pattern. Employees petitioning boards, founders being detained, global investors tightening clauses, and regulators launching probes - it all signals the same thing: India’s startup culture is entering its accountability era. The mood has shifted from “back the genius” to “show me the books.”

Start with the obvious. When a company can’t pay salaries, vendors, or taxes, that’s not just poor cash flow - it’s broken governance. Bira 91’s internal revolt - hundreds of employees protesting delayed payments and unpaid dues - wasn’t just a human resources issue; it was a wake-up call for investors who had trusted the brand’s high-growth narrative. Tens of crores reportedly owed to employees show how fragile compliance has become. The basics - PF, TDS, GST - have quietly slipped from “mandatory” to “optional,” and in today’s funding climate, that can instantly kill a round.

The more dangerous trend, however, is the misconduct born out of the AI gold rush. Startups are under intense pressure to claim an “AI edge,” whether or not it actually exists. The now-infamous case of Builder.ai is the perfect example. Once marketed as a “no-code, AI-powered app builder,” the company relied heavily on human engineers in India - far from the fully automated system it claimed. The illusion collapsed into bankruptcy proceedings, with investigators alleging inflated revenues, circular transactions with an Indian media-tech firm, and sham AI claims.

And this isn’t an isolated concern. Edtech funding in India rebounded nearly 5× year-on-year in H1 2025, much of it chasing AI-driven learning models. The result? Unprecedented performance pressure on startups to deliver “AI miracles” before the tech or team is ready. It’s the same cocktail of hype and speed that previously birthed valuation bubbles in food delivery and crypto. The difference now is that the stakes are higher - because AI tools are harder to audit, and misconduct is easier to hide behind jargon.

Regulatory heat is catching up. The Infra.Market probe remains the ecosystem’s cautionary tale. The Income Tax department’s discovery of ₹224 crore in undisclosed income and alleged bogus purchases reinforced the government’s new posture: compliance is no longer negotiable, no matter how large or well-connected the startup. That same scrutiny is now expanding into AI and fintech, where “smart automation” often conceals messy human processes or risky financial maneuvers.

Meanwhile, Dataisgood’s cofounder Ankit Maheshwari being arrested at Delhi airport and flown to Kolkata over allegations of fraud, conspiracy, and fund misuse showed how the law is finally closing in. The FIR, linked to Skill Arbitrage’s acquisition, went viral across social media, turning a once-obscure corporate case into a public symbol of what happens when governance shortcuts collide with visibility. The message was unmistakable: in the new India, founders can’t hide behind glossy decks and high-profile mentors.

This is why investor behavior is shifting fast. Term sheets now come loaded with longer lock-ins, stricter non-competes, and clawback clauses - giving investors the right to buy back founder shares at deep discounts if misconduct or breach of duty is proven. Boards are insisting on independent directors and real-time compliance dashboards that alert them when PF or TDS filings are missed. It’s not over-regulation, it’s overdue discipline.

Ultimately, this isn’t a crackdown - it’s a correction. The ecosystem is outgrowing its adolescence. Trust, not capital, is now the rarest resource in Indian startups. The founders who protect it - who treat compliance as seriously as code - will be the ones still standing when the next funding wave hits.

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.

“Say Hello To Red Sun”: China Challenges India’s EV Subsidies At WTO, Alleges Unfair Advantage For Domestic Firms

China has taken India to the WTO, claiming New Delhi’s EV and battery subsidies tilt the road unfairly in favor of local players.

Beijing says these incentives block Chinese EVs from entering the market and has vowed to “safeguard” its industry’s rights. Meanwhile, India’s EV scene is buzzing - with 1.74 lakh vehicles registered just last month.

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“Rishta Wahi, Soch Nayi”: Ola Electric Enters Battery Energy Storage System Market With ‘Ola Shakti’

Ola Electric is plugging into the energy storage game with Ola Shakti, powered by its in-house 4680 Bharat Cell tech made at its Tamil Nadu Gigafactory.

Bookings start today for just ₹999, with deliveries timed for Makar Sankranti 2026. The move amps up Ola’s plan to boost Gigafactory utilisation and charge up new revenue streams.

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“KitKat Break Banta Hai”: Zomato takes ‘Wait and Watch’ approach on budget food delivery apps

Zomato is hitting pause on launching a separate budget delivery app, opting to woo cost-conscious diners through its main platform instead.

Founder Deepinder Goyal says the company is testing waters by lowering the minimum order for free delivery from ₹199 to ₹99 for Gold members. With rivals like Swiggy and Rapido’s Ownly eyeing the same segment, Zomato is playing it smart and cautious.

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“Kisiko Pata Nahi Chala”: Koo Cofounder Mayank Bidawatka Rolls Out Photo Sharing App PicSee

Koo cofounder Mayank Bidawatka is back in the social game with PicSee, an AI-powered photo-sharing app under his new venture, Billion Hearts Software Technologies.

Available on Google Play and Apple Store, PicSee lets friends swap photos seamlessly using AI face recognition. Think of it as a smart way to find and share that perfect group selfie hiding in someone else’s phone.

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“Just Like Startin’ Over”: Zepto Cafe CXO Shashank Sharma exits firm to join FoodStories

After three years at Zepto Cafe, CXO Shashank Shekhar Sharma has brewed a new chapter - joining gourmet retail chain FoodStories as its CEO.

The move marks his shift from quick commerce to curated culinary retail. According to his LinkedIn, Sharma stepped into his new role at the Mumbai-based brand this October.

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1. Audio OTT startup Kuku FM has tuned into a massive $85 Mn Series C round led by Granite Asia, with backing from big names like IFC and Krafton. The funds will power premium content and star-studded audio shows featuring popular actors and TV personalities.
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2. Pharma-focused startup Graph AI has secured $3 Mn in seed funding led by Bessemer Venture Partners to advance its drug safety automation platform. Its flagship tool, Graph Safety, uses AI to monitor adverse drug events and streamline regulatory workflows for pharma firms.
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3. AI startup FireAI has raised ₹4 Cr in a seed round led by Inflection Point Ventures to fuel product innovation. The funds will power features like Causal Chain, Text-to-SQL, and a proprietary ETL tool to boost scalability and user experience.
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4. Homegrown footwear startup RARA Barefoot has raised $500K in a pre-seed round backed by founders and executives from Zomato, Urban Company, and Tata 1mg. The funds will fuel its D2C launch, offline retail tie-ups, and debut sneaker line production.
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5. Bengaluru-based deeptech startup Flowatt Battery Science has raised Rs 2.2 Cr in a pre-seed round led by PedalStart. The funds will advance its IoT-powered battery tech, complete its POC, and build partnerships with insurers, EV financiers, and OEMs.
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