Why Blusmart is a textbook case of the challenges of growth—and promoter greed

But it did.

That’s because BluSmart, India’s first all-electric ride-hailing service, seemed like the rare startup that got everything right at the right time. Its customer proposition addressed the key frustrations plaguing Ola and Uber users: clean, company-owned cabs, guaranteed rides with no cancellations, no surge pricing—and zero emissions. It promised both comfort and climate-consciousness, letting users feel good about cutting their carbon footprint.

And for a while, it looked like it was working. Launched in 2019 with $3 million in seed funding and a modest electric vehicle (EV) fleet in Gurugram, BluSmart appeared to be accelerating at, well, an electric pace.

Read this | Low battery: The biggest challenge hindering BluSmart, the all-electric cab company

By 15 April, when the Securities and Exchange Board of India (Sebi) effectively pulled the plug by banning promoters and brothers Anmol and Puneet Singh Jaggi from the securities market, BluSmart had grown into South Asia’s largest EV fleet—with around 8,500 vehicles.

In November last year, the company claimed its gross merchandise value (GMV) had hit ₹275 crore in the first half of FY25, up 77% year-on-year. Its annualised revenue run-rate had crossed ₹400 crore.

So what went wrong?

To be sure, Sebi’s charges of financial fraud and fund diversion against the Jaggi brothers didn’t relate to BluSmart directly, but to their other venture, Gensol Engineering, a solar EPC firm. Yet the lines between the two blurred—critically so. Gensol had invested heavily in buying EVs for BluSmart’s fleet. When the reckoning came for Gensol, BluSmart felt the blow.

Read this | Gensol: The Jaggi brothers made smart moves. So, why did they need a ‘piggybank’?

In his book Why Startups Fail: A New Roadmap for Entrepreneurial Success, Harvard Business School professor Tim Eisenmann identified six recurrent ‘patterns of failure’. These include: misreading market demand; scaling too quickly, which drives up cash requirements and customer acquisition costs while attracting competitors and eroding margins; failing to secure funding at critical stages and lacking the operational capability or strategic support to scale effectively; betting on too many variables aligning at once—a gamble Eisenmann likens to winning at roulette; choosing the wrong partners or advisors; and launching a product prematurely, without adequate research or refinement.

In hindsight, BluSmart checked almost every box. 

It misread the initial enthusiasm of climate-conscious early adapters as a signal of pent-up demand. Competitors geared up, Uber introduced its green fleet (reports suggest BluSmart will be added to the Uber platform now), it could not sustain its cash burns, it appeared to have the right partners (Jio-BP, but they did not come up with additional funding), and above all, messing up its own USP by introducing rush hour pricing, on-demand rides (earlier, it was pre-book only) and moving away from company fleets and salaried drivers.

But BluSmart’s two biggest problems don’t quite find a place in Eisenmann’s book: promoter greed, and failure of governance. 

At the heart of the collapse was a fundamental misjudgment: treating gross revenue as profit, and investor money as personal wealth. Lavish personal spending—buying ₹43 crore homes, luxury golf club memberships, and large transfers to family—betrayed a fatal lack of discipline.

There might have come a time when the Jaggis could have afforded those things. But that time wasn’t now—and the money wasn’t theirs.

A failure to distinguish the difference between gross turnover and net earnings and a blurring of lines between personal money and investor money led to the downfall of the Jaggis.

Still, Eisenmann warns about ‘attribution bias’—the tendency to blame proximate and visible causes , like the founders, while overlooking deeper, underlying causes of failure.

In BluSmart’s case, one could argue that poor oversight and absence of adequate internal controls arguably played just as big a role. The boards at both Gensol and BluSmart clearly failed to provide adequate oversight or guidance, as did its principal investors.

Also read | How to spot the next Gensol before it’s too late

In fact, India’s startup landscape is littered with expensive failures, principally brought about by promoter overreach (at best) or fraud (at worst). From Byju’s to PayTM, from Housing.com to BharatPe to Zilingo, there are plenty of instances where promoter and board failure, and a lack of ethical oversight, have put paid to promising stories.

BluSmart’s collapse is yet another reminder that for all the bold ideas and breakneck growth, startups are still businesses. And basic business discipline still matters.

Ignore that at your peril.