Exclusive: Why Zupee’s AI Pivot Was A Smokescreen For Its Shutdown?

Delhi NCR-based gaming startup Zupee has nothing more to lose. For one, it laid off its entire workforce of 80-100 employees in October this year, marking the third and final round of layoffs. Then, its announcement of a pivot towards AI has failed to see the light of day.

According to sources, the startup has provided severance pay to the affected employees, covering the period until January 2027, and its October pivot was a veiled attempt to present the impending closure. 

The final round of layoffs coincided with Zupee’s public announcement of its foray into AI, Inc42 has learnt. On October 16, the startup said it was positioning its existing technological capabilities as the foundation for its AI ambitions. However, it did not disclose its new gig.

Further, the October layoffs followed two earlier rounds of job cuts. Zupee sacked around 200 employees 10 months before its October layoff and nearly 170 employees before that. At its peak, the startup employed close to 500 employees.  

Inc42 reached out to Zupee for comment but did not receive a response.

Zupee Disguises Shutdown?

On October 16, Zupee announced that it was exiting the gaming business and would focus on building AI-led ventures. The ailing startup said it would leverage its experience of serving over 200 Mn users to develop AI products for Indian consumers.

“There was no AI plan. It was a damage control exercise to hide the fact that Zupee was winding down its operations. Currently, they have no employees left, barring 3-4 who are working with the founders,” sources told Inc42.

Meanwhile, Zupee has also shut down its astrology platform, NeoAstro, and its microdrama venture, Zupee Studio, as part of its restructuring in October. The closure of these businesses suggest that Zupee may have already been winding down.

Zupee entered the microdrama segment as part of this diversification strategy. It was in advanced discussions to acquire Vertical TV. “However, the proposed acquisition eventually fell through,” sources said. Inc42 could not independently ascertain the reasons behind this.

What Happens To Zupee’s $120 Mn Warchest?

Founded in 2018 by Dilsher Singh Malhi and Siddhant Saurabh, Zupee built its business around mobile versions of traditional Indian games, including Ludo, Snakes and Ladders and Carrom.

Over the years, it had raised over $120 Mn from investors, including Z47, Orios Venture Partners, Nepean Capital, WestCap Group, Tomales Bay Capital and AJ Capital.

With its gaming business discontinued and its other consumer ventures reportedly shut down, questions remain about the startup’s remaining cash reserves, assets and outstanding liabilities.

Inc42 reached out to Zupee’s investors, including Z47 Partners and Nepean Capital, to understand whether they were informed about the impending shutdown and workforce reduction, and whether the AI pivot was presented to them as a genuine business strategy. 

Investors have also been asked about the current status of their investment, the possibility of recovering unutilised capital and whether the management has initiated discussions around a potential shutdown or liquidation. However, none of the investors responded to Inc42’s queries.

For a startup that raised close to $120 Mn and built a consumer platform with a claimed user base of over 200 Mn, the developments mark a significant reversal from its earlier growth ambitions.

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