December 29, 2025: India’s startups ecosystem raised $10.5 billion in 2025, but the year was defined less by how much money came in and more by how carefully it was deployed. Investors funded far fewer startups, cutting the number of deals by nearly 39% compared to the previous year, according to data from Tracxn.
The drop in deal activity highlights a clear shift in investor behaviour. Rather than backing a wide range of young companies, investors focused on a smaller group of startups that could show early traction, revenue visibility, or clearer paths to long-term sustainability.
Fewer bets, more scrutiny
A total of 1,518 funding rounds were completed during the year, down sharply from 2024. While funding volumes declined by just over 17%, the much steeper fall in deal count suggests investors were consolidating capital rather than exiting the market.
This approach played out differently across funding stages. Seed-stage startups were hit the hardest, with funding falling 30% to $1.1 billion as investors reduced exposure to unproven ideas. Late-stage funding also slowed, dropping 26% to $5.5 billion, as expectations around profitability, scale, and exit timelines tightened.
At the same time, early-stage funding increased 7% to $3.9 billion, indicating continued support for startups that had moved beyond experimentation and could demonstrate market demand. Investors appeared more willing to back companies that had product-market fit, even if they were still in the early phases of growth.
AI draws attention, but not aggressive capital
Artificial intelligence remained an area of interest, but funding levels stayed relatively measured. Indian AI startups raised $643 million across 100 deals in 2025, a modest increase from the previous year. Most of this capital went to early and early-growth stage companies, rather than large, late-stage rounds.
This pattern stands in contrast to the U.S., where AI funding surged during the year and became increasingly concentrated among a small number of large companies. In India, investors largely favoured application-led AI startups that address specific business or consumer problems, rather than capital-intensive foundational model development.
Funding spreads across sectors in the Indian Startups Ecosystem in 2025
Despite global focus on AI, India’s startup funding remained spread across a range of sectors. Consumer services, fintech, manufacturing, and deep-tech continued to attract capital in 2025.
Consumer startups benefited from changing urban habits, particularly demand for quick commerce and on-demand services, which are supported by India’s population density and cost structure. Manufacturing and deep-tech startups also gained attention, as investors looked for opportunities where India faces less global competition and has strong domestic advantages.
Advanced manufacturing has grown steadily over the past few years, supported by supply chain shifts and increased interest in locally built hardware, energy, and industrial technology.
A smaller investor base
The funding slowdown also reshaped who participated in deals. About 3,170 investors were active in India’s startup funding rounds in 2025, down 53% from the previous year. India-based investors made up nearly half of this group, suggesting that domestic capital played a larger role as some global funds adopted a more cautious stance.
Funding activity became more concentrated among a smaller set of repeat investors, reflecting a market where conviction and long-term relationships mattered more than broad participation.
Women-led startups face tighter conditions
Women-founded startups saw funding remain relatively stable at around $1 billion, down slightly from 2024. However, deal activity declined sharply. The number of funding rounds fell 40%, and the number of first-time funded women-led startups dropped 36%, pointing to higher entry barriers for new founders.
While established companies were still able to raise capital, newer ventures found it harder to secure early backing in a more selective environment.
Government steps up support
Government involvement became more visible in 2025. India announced a $1.15 billion Fund of Funds to improve access to startup capital, along with a ₹1 trillion research and innovation programme focused on areas such as energy transition, quantum computing, space technology, biotech, and AI.
These initiatives helped attract private capital into deep-tech sectors that typically require longer development cycles. Government participation also reduced regulatory uncertainty, making investors more comfortable backing companies with longer paths to commercialisation.
Exits show gradual improvement
Exit activity offered signs of stability. 42 tech companies went public in 2025, up from 36 the previous year, while mergers and acquisitions rose 7% to 136 deals. Domestic institutional and retail investors accounted for a larger share of IPO demand, reducing reliance on foreign capital.
India’s unicorn count remained flat, but startups reaching billion-dollar valuations did so with less capital and fewer funding rounds, reflecting more controlled growth strategies.
A more measured phase
As India moves into 2026, challenges remain, particularly in scaling late-stage funding and strengthening its position in global AI development. Still, 2025 points to an ecosystem that is becoming more disciplined rather than shrinking.
With fewer deals, tighter scrutiny, and improving exit pathways, India’s startup market is entering a phase shaped less by rapid expansion and more by execution, efficiency, and long-term viability.
