Why Indian Startups are coming back home
Welcome to this week’s edition of TOPICAL WEDNESDAY! Today, we will dive into a powerful shift happening in India’s startup landscape and will explore why some of India’s biggest startups are coming back home.
In May 2025, Razorpay, one of India’s leading fintech players, made waves by relocating its parent entity from the U.S. back to India. While the company has always served the Indian market, its legal base was in the U.S.—until now. This move, known as a “reverse flip,” signals more than a change of address. It marks a deeper shift: Indian startups are increasingly finding it better to scale, raise capital, and even go public without leaving the country.
Razorpay isn’t alone. PhonePe kicked off the trend in 2023. Groww and Zepto followed suit in 2024. Now, Meesho and Pine Labs are expected to join the reverse flip movement in 2025. Altogether, at least nine venture-backed startups have either completed or initiated reverse flips since 2023 (according to multiple reputable sources).
But before we explore why this is happening—let’s rewind.
First, What Was a Flip?
For years, Indian startups opted to “flip” by incorporating their parent companies overseas—in jurisdictions like the U.S., Singapore, or the Cayman Islands. This offered a slew of advantages: easier access to capital, investor-friendly legal systems, and smoother paths to global IPOs. Between the late 2000s and early 2020s, flipping became the default for any ambitious Indian startup.
Why the Flip Is Reversing Now?
Reverse flipping refers to the process of moving a startup’s parent entity back to India. And it’s not just a symbolic move. It reflects India’s transformation into a credible base for everything that once required a foreign address—capital, legal clarity, IPO readiness, and operational scale.
Let’s break it down:
- Faster, simpler redomicile process:
Until recently, reverse flipping was a bureaucratic slog—taking over a year in some cases. But since 2023, regulatory reforms have streamlined the process, cutting it down to just 3–4 months. Lower compliance costs and clearer legal pathways are now encouraging startups to consider the move.
- Stronger Indian IPO markets:
India’s stock markets have matured. Startups no longer need to be based in Delaware or Singapore to access large pools of capital. In 2024, Indian tech IPOs raised Rs. 29,247 crore ($3.5 Bn) across 13 deals, up 44% YoY (Prime Database, Jan 2025). With growing participation from domestic mutual funds, institutional investors, and retail investors, the runway to a successful local listing is now much clearer.
- Business fundamentals work better at home:
For many startups, India is already the core market. For example, Razorpay generates ~80% of its payment volume domestically, and running cloud infrastructure here is up to 30% cheaper (Company filing, May 2025). Add to that a large talent pool and lower operational costs, and it’s easy to see why keeping headquarters in India now makes financial and strategic sense.
(Source: Bastion Research)
The reverse flip movement is part of a larger evolution. India’s startup ecosystem is finally developing the depth and resilience that used to only exist offshore. Here’s what’s enabling that shift:
Surge in Indian Capital
Indian capital is rising to meet the moment. Where earlier founders had to look abroad for large rounds, we’re now seeing significant domestic firepower. Alternative Investment Funds (AIFs), family offices, and homegrown PE/VC funds are taking on a bigger role in both early and growth-stage financing.
For example, Category-II AIF commitments touched Rs. 10.3 lakh crore as of March 2025, reflecting a ~13% YoY increase (SEBI, Apr 2025). This expanding pool of capital reduces reliance on foreign funds and makes it more feasible for companies to remain domiciled in India.
Private Credit Gaining Ground
Alongside equity, private credit has emerged as a major pillar of startup financing in India—especially for late-stage ventures looking for growth capital without dilution. Indian startups are increasingly tapping into structured credit, revenue-based financing, and asset-backed lending.
In just the first half of FY25, $6 Bn in private credit flowed into late-stage startups—already on pace to eclipse FY24’s record of USD 8.5 bn (EY Private Credit Monitor, Aug 2025). This shift gives founders more control over their cap tables and another financing tool besides equity rounds.
Better Liquidity for Founders and Employees
The availability of liquidity is no longer restricted to IPOs. ESOP buybacks, secondary sales, and private market transactions have all picked up steam. This gives early employees and founders a way to partially cash out or rebalance—without having to wait for a public listing.
In 2024, startups returned Rs. 1,450 crore to over 3,000 employees through ESOP buybacks alone (VCCircle, Dec 2024). The result: cleaner cap tables, better employee retention, and smoother transitions into IPO or acquisition mode.
Policy Push
The government is steadily lowering friction points for Indian startups. Recent initiatives are helping cut red tape, encourage domestic incorporation, and provide capital for innovation.
- Rs. 20,000 crore Deep-Tech Fund announced in Union Budget 2025 to boost R&D-heavy startups
- Angel tax abolished from FY26, removing a long-standing pain point for early-stage fundraising (CBDT circular, Mar 2025)
- GIFT City is gaining traction as a financial and listing hub, with the first startup IPOs expected in H2 2025 (IFSCA release, May 2025).
Rise in Domestic M&A
India’s M&A market is heating up, offering startups another viable path to exit. Strategic acquisitions by larger Indian companies are helping consolidate fragmented sectors—from e-commerce to SaaS to fintech.
Q1 2025 alone saw $27.5 Bn in domestic M&A deals—a three-year high (Grant Thornton Dealtracker, Apr 2025). That’s validation that Indian companies can be buyers, not just targets—and that founders can build with exit optionality at home.Imagine a bond paying Rs. 5 interest per year with an original price of Rs. 100 (a 5% yield). If negative news causes investors to sell, the bond price might drop to Rs. 90. Now, buying at Rs. 90, but it still yields Rs. 5 annually, therefore, the effective return is about 5.5%. Thus, yield rises as price falls.
(Source: Inc42 (India), Dealroom (USA & China))
What It Means for India
The shifts we’re seeing (reverse flips, deeper capital markets, a maturing private credit ecosystem, and friendlier policies) are embedding startups more firmly into India’s financial and economic core.
They help ensure that intellectual property, profits, and talent stay within the country, rather than flowing overseas. This growing domestic orientation also strengthens financial markets, as more startups choose to list or operate locally, making the ecosystem more resilient. For the next generation of founders, it lowers the barriers to thinking India-first from day one—without needing to incorporate abroad just to raise or return capital.
Looking Ahead
Whether it’s a startup choosing to stay headquartered in India, raise growth capital from a domestic AIF, list locally, or get acquired by a homegrown strategic, founders today have far more viable, India-based pathways to scale. India is evolving from a startup exporter to a startup builder and keeper.
Happy Investing !!!
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Disclaimer: This newsletter is for educational purposes only and is not intended to provide any kind of investment advice. Please conduct your own research and consult your financial advisor before making any investment decisions based on the information shared in this newsletter.
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