(The Weekend Insight) - The Startup Boom Was Built on Beautiful Lies

In today’s deep-dive, we will explore how few Indian startups built glory on numbers that looked good on pitch decks but collapsed under audit. What we saw from 2017 to 2022 wasn’t just optimism - it was theatre. And this theatre had actors, scripts, props, and an audience willing to suspend disbelief as long as the story kept moving up and to the right. Founders discovered that investors rarely questioned a beautiful dashboard, VCs realised they could justify sky-high valuations if the graphs pointed up, and the ecosystem collectively agreed to stop asking: “But is any of this real?”

It wasn’t malice - it was momentum. India’s startup ecosystem went from fifty ‘fundable’ companies to five thousand in under seven years. Growth became the only language everyone spoke. But growth is expensive, and India is a price-sensitive market. So founders learned to tell stories using numbers that suggested traction - even when traction was only a theory. Somewhere between ambition and pressure, a new culture emerged: the culture of vanity metrics.

We think India’s vanity-metrics era can be understood through its three biggest currencies: downloads, GMV, and inquiries. Each told a seductive story on paper, and each concealed the operational reality underneath.

Take downloads - the favourite metric of consumer-tech founders. A founder raising a Series A in 2019 would proudly declare: “We crossed 10 million app installs.” Investors nodded. Media celebrated. But buried under the headline was a deeper truth: only five percent opened the app twice. One percent made a purchase. And half of the installs came from incentivised campaigns where users got ₹20 Paytm cashback for downloading the app. Yet to the outside world, downloads looked like momentum.

GMV - Gross Merchandise Value - was even more dramatic. For marketplaces, logistics startups, mobility apps, and quick-commerce platforms, GMV became the shortcut to proving scale. But GMV wasn’t revenue; it wasn’t even always money exchanged. Many companies counted cancelled orders, returned items, or deeply discounted sales as GMV. One hyperlocal startup famously counted every grocery search as GMV potential and declared it as “GMV preview” in investor calls. For a brief moment, nobody questioned it.

And then there was the most infamous vanity metric of all: order inquiries. Several early-stage D2C brands proudly declared they had “100,000 order inquiries a month.” On closer inspection, inquiries were simply website visits or Instagram DMs saying “price?” or “COD available?” Yet these were converted into slides under “monthly traction.” The ecosystem had quietly turned curiosity into conversion.

This inflation wasn’t limited to small startups. Unicorns played the game at scale. BYJU’S famously reported “learning hours”, “registered students”, and “video consumption minutes” as key traction indicators. Lido Learning kept announcing “10x student growth” and “explosive demand” even though a large part of its revenue came from aggressive loan-based sales. Trell publicly claimed 100+ million monthly active users, positioning itself as the next big content commerce platform.

Snapdeal announced huge growth in registered users - but internal documents later showed many signups were driven by discount-hunting deal users, not loyal buyers. Another example of Housing.com, which during its hyper-growth phase, used “listings added,” “pageviews,” and “map interactions” as its proof of traction. Later, internal chaos and mismanagement showed many of these signals didn’t translate to real estate transactions. Swiggy often advertised Instamart’s GMV growth during its early blitz.

In the funding boom of 2020-2021, nobody wanted to slow down. Investors feared missing out. Founders feared being left behind. So the numbers kept inflating. The pressure to look bigger, faster, stronger led to internal dashboards that executives privately joked about. OYO often reported booming GMV and rapid hotel expansion. But leaked investor reports (SoftBank Vision Fund slides) showed gross numbers ignored high cancellation rates, deep discounting, and unprofitable contracts. The cleaned-up numbers painted a very different picture.

For years, this culture thrived because it worked. Vanity metrics got funding. Funding bought growth. Growth produced real metrics eventually. As long as the music played, everyone danced.

Dunzo often highlighted number of cities launched as a growth indicator rather than unit economics or profitability. Before its shift to quality and profitability, Urban Company often reported: service bookings, professionals onboarded, and app installs. While repeat usage and unit economics were weak in several categories.

But the system broke when the funding winter arrived in 2022. Suddenly, investors wanted retention numbers, not download counts. They wanted net revenue, not GMV. They wanted unit economics, not curated dashboards. Startups that had built castles out of inflated metrics found themselves stumbling when asked basic questions like: “What percentage of users return after week one?” The answers were often brutal.

Unacademy routinely highlighted “active learners,” “watch minutes,” and “DAUs”. Yet the number of paid users was a fraction of the claimed activity. Post-COVID, revenue collapsed once the real retention numbers surfaced.

We think the real victims of the vanity-metrics era were employees and early angels. Many joined companies believing the numbers were real. ESOP valuations were built on these inflated figures. When companies collapsed or down-rounded, employees discovered they had traded stability for illusions.

One employee from a fintech unicorn said in an exit interview: “Every town hall, we heard numbers that sounded incredible. Now I realise we were celebrating forecasts, not facts.”

The broader ecosystem paid a price too. When startups failed, headlines blamed the idea, not the numbers behind it. The narrative became: “India is too price-sensitive” or “Consumers don’t pay.” Rarely did anyone admit the truth: the business never had real traction to begin with.

The media also played a part. Publications rewarded big numbers because big numbers equalled big headlines. No journalist writes a story titled: “Startup grows slowly but sustainably.” They prefer: “Startup crosses 10 million users,” even if those users have churned. Vanity metrics created viral stories; viral stories created buzz; buzz created valuation.

This feedback loop created an illusion of momentum. Founders kept up the performance because the ecosystem incentivised performance. By 2021, every pitch deck started with “Our traction,” not “Our customers.” Every founder had a playbook for presenting their best numbers - usually the least meaningful ones.

By 2023-2024, the ecosystem began to detox. Investors who once accepted vanity metrics without blinking suddenly started asking for real retention cohorts, audited revenue numbers, and proof of contribution margin. Founders who had built their narratives around surface-level growth had to confront a new reality: the ecosystem no longer cared how big the top of the funnel looked - it wanted to know what survived the bottom.

The most dramatic shift happened during due diligence. In the boom years, diligence was a formality - a process squeezed between term sheet signing and livestreamed funding announcements. But by 2023, it became a battlefield. Funds began hiring forensic auditors to validate dashboards. Claimed MAUs were cross-verified with backend logs. Reported GMV was compared against bank inflows. CAC calculations were reconstructed from raw ad campaign data. Many founders privately admitted the same thing: “We were more scared of due diligence than fundraising.”

GoMechanic admitted to fabricating revenue and attributing income to non-existent garages, turning “growth dashboards” into fiction. Snapdeal’s discount-era “inquiry surges” were eventually traced to spam traffic and coupon hunters, not real buyers. Even Practo’s early years leaned heavily on “appointment requests” that didn’t convert. Together, these cases showed a common truth: India didn’t have a vanity-metrics problem in theory - it had one in practice.

We think the most important correction wasn’t financial - it was psychological. For the first time in a decade, founders began asking themselves a simple question before presenting a number: “Will this survive an audit?” That question alone reset the ecosystem.

One top-tier fund even introduced a “No Vanity Metrics” clause: founders must disclose at least three metrics tied directly to revenue or retention for every vanity metric shared in pitches.

Meanwhile, employees - often the silent observers of inflated dashboards - found themselves confronting the aftermath. As companies corrected their numbers, teams realised how far perception had diverged from reality. In multiple unicorns, internal dashboards were quietly updated, cutting vanity metrics by 30-70%. Growth teams that once celebrated hollow spikes now had to explain why the real numbers looked flat. ESOP holders realised their valuations were built on sand.

In this correction, a new respect for real numbers emerged. Sustainable startups - the ones quietly doing ₹2-10 crore monthly revenue with positive margins - began getting investor attention over “rocketship” companies. For the first time in a decade, boring became beautiful.

The detox also reshaped sectors differently. In D2C, the days of counting Instagram followers as traction are gone; brands now measure repeat purchase cohorts and contribution margin after discounts. In SaaS, “sign-ups” have given way to “paid conversions.” In quick commerce, GMV bravado has been replaced with delivery-cost optimisation. In fintech, “loan applications initiated” has morphed into “risk-adjusted disbursements.”

Perhaps the most symbolic shift happened in edtech - the industry that once mastered vanity metrics. After years of reporting “learning hours,” “video minutes,” and “registered learners,” the post-2022 reckoning forced companies to release real numbers: active paying users, refunds, and centre-level profitability. The difference was staggering. Some companies saw their reported traction shrink by 80%. But in that shrinking, credibility grew.

Media, too, adjusted. The same publications that once celebrated every download milestone began scrutinising CAC burn, cohort retention, and cash flow. Headlines shifted from “XYZ crosses 10 million users” to “XYZ achieves profitability in three cities.” The spotlight moved from size to substance.

Regulators entered the picture as well. SEBI’s tightened IPO norms after seeing pre-IPO profit spikes and post-IPO crashes forced startups to clean up metrics before listing. MCA cracked down on misreported numbers in filings. GST departments scrutinised inflated GMV claims from gaming and fintech companies. The era of creative storytelling met the era of compliance.

By 2025, the ecosystem had moved into what many call the “post-vanity era.” Founders no longer bragged about vanity metrics; they mocked them. Investors openly warned against them on podcasts. Employees demanded transparency in all-hands meetings. This cultural shift wasn’t driven by virtue - it was driven by exhaustion. Everyone was tired of pretending.

Yet the vanity-metrics culture hasn’t disappeared - it has adapted. Instead of downloads, founders now push “engagement minutes.” Instead of GMV, they highlight “contribution margin after passthrough costs.” Instead of inquiries, they emphasise “intent signals.” The jargon has evolved, but the instinct remains. The new vanity metrics are sophisticated, jargon-heavy, and harder to interrogate:

• “Adjusted contribution margin after passthrough costs”

• “AI agent completions per workflow”

• “Automation minutes saved”

• “Intent-qualified leads”

• “Engagement depth index”

• “Product activation surges”

They sound scientific. They sound impressive. They reveal very little.

We think India’s next vanity-metric wave will center around AI - because AI is the new gold rush. Investors don’t fully understand AI benchmarks yet, and founders know it. Early movers are already pitching metrics like “model tokens processed,” “GPU hours utilised,” and “agent latency improvement,” none of which relate directly to revenue, margins, or retention. It’s the same vanity-metric instinct, wrapped in a futuristic vocabulary.

The vanity-metrics era wasn’t all bad. It created momentum, inspired ambition, and brought global attention to India’s startup ecosystem. But it also created fragility. And when the correction came, it was brutal but necessary.

Today, India’s startup story is entering a truth-first phase. Unit economics, retention curves, and sustainable acquisition are no longer optional. The real heroes are no longer the companies that grew the fastest, but the ones that grew honestly.

If the last decade taught India how to dream, the next will teach it how to deliver. And maybe that’s what the ecosystem needed all along - less theatre, more truth.