The global startup ecosystem in 2025 shows both resilience and volatility. While hundreds of new unicorns emerged, many former giants fell below the billion-dollar threshold. Market corrections, regulatory shocks, and financial mismanagement all played roles in stripping companies of their coveted unicorn badges.
The most striking examples this year came from India’s real-money gaming sector and the collapse of Builder.ai. Together, they highlight how quickly fortunes can shift when governments act decisively or when businesses fail to maintain operational discipline.
Indian Real-Money Gaming Startups Face a Crushing Ban
In India, four major startups—Dream11, Games24x7, Gameskraft, and Mobile Premier League (MPL)—lost unicorn status in 2025. The reason lay not in market sentiment but in the government’s sweeping ban on real-money gaming.
The Indian Parliament passed a law that banned all forms of real-money online games, prohibited advertising for these services, and barred financial institutions from processing related payments. The new law hit companies that once symbolized the rapid rise of gaming in India.
- Dream11, which had 260 million users, lost its billion-dollar valuation.
- Games24x7, with 120 million users, saw the same fate.
- Gameskraft, which hosted around 30 million users, also fell below unicorn status.
- MPL, with 90 million users, joined the group.
Investors quickly marked down their valuations. Overnight, these companies that had dominated fantasy sports and casual gaming lost not only their unicorn tag but also their long-term growth story. Other gaming startups like Zupee and Winzo Games also suffered heavy valuation cuts, even though they had not reached unicorn status.
This regulatory clampdown demonstrated how government action can wipe out billions in startup value within months.
Global Decline in Unicorn Valuations
The fall of Indian gaming unicorns aligned with a broader global trend. Over the past two years, startups have struggled to maintain lofty valuations set during the capital-rich environment of 2020–2021.
The Hurun Global Unicorn Index 2023 already reported that 128 unicorns lost valuation, and 42 of them dropped below $1 billion. Analysts tracked the continuation of this trend into 2024 and 2025.
Industry Ventures reported that nearly 30% of unicorns from the peak years now qualify as “Horses,” meaning they no longer meet the billion-dollar mark. Over 80% of unicorns have seen their valuations shrink compared to their highs.
The correction shows that investors now demand stronger fundamentals, not just growth promises. The era of cheap money pushed many companies into unicorn territory, but higher interest rates and tighter funding cycles have forced investors to reassess.
Builder.ai Collapses Under Debt
One of the most dramatic stories of 2025 came from Builder.ai (formerly Engineer.ai). Once a celebrated startup backed by Microsoft and Qatar’s sovereign wealth fund, Builder.ai entered insolvency proceedings after failing to manage its debts.
The company owed Amazon about $85 million and Microsoft about $30 million. Builder.ai reported revenues of $140 million in 2023 but later had to revise those numbers downward. Its 2024 revenue forecast dropped by 25%.
At one point, Builder.ai operated with only $7 million in cash reserves while struggling with payroll obligations. With little cash and large debts, the startup defaulted. Senior lenders then forced the company into administration.
Builder.ai’s fall shows how internal mismanagement can destroy even well-funded startups. Investors had once praised its modular software development model, but poor financial planning, aggressive debt accumulation, and revenue misstatements erased its credibility.
Market Sentiment in 2025
Despite these collapses, unicorn creation has not stopped. Crunchbase data shows that by August 2025, the total value of unicorns worldwide reached $6 trillion. More than 1,300 unicorns remain active, and over 600 new unicorns have emerged this year.
However, the pace of new unicorn creation has slowed sharply. Only four new unicorns appeared in August, compared to dozens per month in earlier years.
Investors now expect many unicorns to face a difficult road ahead. Several dealmakers predict that many companies will either become “zombies” with no clear exit strategy or lose their unicorn tag through down rounds and valuation resets.
Mergers and acquisitions now look more realistic than IPOs for unicorn exits. Public markets remain skeptical of startups with weak profitability, and IPO windows stay narrow.
Key Startups That Lost Unicorn Status in 2025
To summarize, the following companies lost unicorn status this year:
- Dream11 – User base of 260 million; valuation collapse after Indian ban on real-money games.
- Games24x7 – 120 million users; lost unicorn rank for the same reason.
- Gameskraft – 30 million users; valuation below $1 billion after ban.
- Mobile Premier League (MPL) – 90 million users; lost unicorn badge under new law.
- Builder.ai – Insolvency due to $115 million in debts and poor financial management.
While other startups face pressure, these five companies represent the most visible examples of unicorns stripped of their status in 2025.
Lessons for Startups and Investors
The loss of unicorn status for these companies reveals several patterns that both founders and investors must understand.
Regulation Can Change Everything
The Indian real-money gaming ban proved that startups cannot assume stability in sensitive sectors. Governments can act suddenly, and startups that rely heavily on regulatory gaps risk total collapse when laws change.
Valuations Must Match Fundamentals
The global decline of unicorns into “Horses” shows that inflated valuations without profitability eventually correct. Companies must focus on sustainable business models instead of chasing artificial growth.
Operational Discipline Is Critical
Builder.ai’s insolvency underlines how financial mismanagement can doom even promising startups. Leaders must manage debts, keep realistic revenue projections, and maintain investor trust.
Exit Strategies Are Shifting
With IPO markets cold, many unicorns must now look at M&A deals for survival. Founders must plan for realistic exits, not dream of billion-dollar public listings without profitability.
Outlook for the Rest of 2025
As 2025 continues, analysts expect more unicorns to lose their billion-dollar tag. Gaming, fintech, and crypto remain high-risk sectors due to regulatory scrutiny. Startups with weak cash positions may also struggle as venture capitalists tighten funding.
However, strong companies in AI, robotics, and enterprise software continue to attract capital and sustain valuations. Investors now favor startups with strong revenue growth, efficient cost structures, and compliance readiness.
Conclusion
In 2025, startups such as Dream11, Games24x7, Gameskraft, MPL, and Builder.ai lost unicorn status because of regulatory shocks and financial mismanagement. Their downfall illustrates the fragility of unicorn valuations.
The unicorn badge no longer guarantees stability. Governments, investors, and markets now demand more than just rapid user growth. Startups must prove they can operate sustainably, manage finances responsibly, and adapt to changing laws.
As the year progresses, more companies may join the list of fallen unicorns. The rise and fall of these startups serves as a reminder that in the world of entrepreneurship, valuations can rise quickly—but they can also disappear just as fast.
Also Read – Builder.ai: How a Promising AI Startup Collapsed