"Millions of dollars were being given away to young graduates, who got used to playing with other people's money and not sharing any risks," said Sunil Kalra, an investor who has invested in over 80 start-ups.
Kalra told CNBC that, just two years ago, he found at one of the prestigious Indian Institute of technology campuses that half of the graduating batch had decided to sit-out the regular job placements as they wanted to become entrepreneurs. "That percentage has drastically come down now," he said.
Kalra added that he's also changed his investment strategy, looking to back "mature entrepreneurs with deeper credentials."
In the first nine months of 2017, about $3 billion has been invested in companies less than 10 years old, a steep fall from the 2015 high, data from Venture Intelligence show. No more than 1,000 significant start-ups have been founded year-to-date compared to over 6,000 in 2016, industry insiders said.
A survey conducted by the IBM Institute for Business Value released in May this year concluded that 90 percent of Indian start-ups fail within the first five years of operations, as Indian entrepreneurs largely have yet to display unique business models — they're still inclined to emulate successful global ideas.
Older start-ups like online retailer Flipkart and app-based taxi survey Ola, though iconic names in India, were borrowed ideas. But now, investors are looking at Indian entrepreneurs to change their "copy paste" model. According to the IBM survey, 77 percent of venture capitalists said they believe many Indian start-ups lack "pioneering innovation based on new technologies."
"The days of 'super funding' are over. Replications [of a foreign idea] are not getting money," said Rishabh Lawania, co founder of Xeler8, which represents a Chinese fund looking to invest in India.