When Catamaran Ventures’ President, Deepak Padaki, recently observed that loss-making companies are seeing secondary sales at a 30–40% discount, it may have seemed to many like a new phenomena. But this is the reality for the Indian startup ecosystem since late 2023: VC exits with big discounts on the valuation.

Startups without clear paths to profitability have all gone through a valuation reset, with discounted exits becoming increasingly common in growth and late-stage deals.

Investors told Inc42 that the frequency of discounted transactions has risen over the past few years, pointing to cases such as Eruditus, Postman, and Exotel, which saw secondary sales at 20–40% markdowns between late 2023 and mid-2025.

Although startups that endured the difficult years from late 2022 to 2025 have largely stabilised, focussing on sustainability over growth and even planning IPOs. Distress sales, where companies are sold because there is no path forward, have become somewhat rarer.

Most discounts today occur in secondary transactions driven by funds nearing closure or holding large stakes. In some cases, investors sell early — even ahead of IPOs — to secure partial exits.

But the steepest corrections are happening in companies that prioritised scale and optics over fundamentals.

Sagar Nishar, CIO of Aarii Ventures, the investment office of the Kothari family, highlighted that investors are no longer rewarding narratives. They are examining governance, margin stability, and customer retention more deeply. Some buyers are passing on even 40% discounted rounds when fundamentals do not hold as the mindset has shifted from “cheap is attractive” to “defensible is attractive.”

An example he cited is of a consumer brand (name not revealed), which pursued aggressive expansion and gained nationwide recognition in 2024 through branding and celebrity endorsements, but mismanaged costs and lost key team members, resulting in a 50% drop in valuation.

Or a deeptech venture (again undisclosed) with long R&D cycles exited at less than half its peak valuation. These companies were backed when funding was flowing freely, but now VC firms are looking to exit their positions as their funds expire.

It’s not just deeptech, but even edtech, aspirational retail chains, B2C fintech apps have faced steep cuts as customer acquisition costs outpaced retention.

“We have observed that companies experimenting with scaling or untested business models faced sharper adjustments, while industrial, frontier tech, and regulated sectors largely maintained valuations. Overall, around 6-8% of exits we tracked in the last year happened at a discount, showing that corrections are selective rather than uniform,” added Nishar.

On a similar note, Abhishek Prasad, managing partner at Cornerstone Ventures, an enterprise SaaS fund focussed on early growth-stage startups, noted that in the commerce ecosystem — spanning B2C, B2B, and retail — corrections have largely played out, leaving the space more streamlined. He added that sectors like distribution, logistics, and healthcare are relatively stable, as their opportunities were never overstated or oversold.

Still, not all trends are positive. Nishar observed that distress-led sales are likely to persist over the next year, particularly among companies weighed down by high fixed costs or unsustainable marketing spends.

“By 18-24 months, we expect a bifurcated market: disciplined, cash-generating businesses will command premiums again, while visibility first ventures will continue to see markdowns or consolidation,” said Nishar.

Discounted Exits: Cause For Concern Or Market Normalisation

© Inc42