September 4, 2025: Venture capital (VC) funding into Indian startups has faced a setback in 2025, with total funding dipping by 18% compared to the same period last year. In the first nine months of 2025, Indian startups raised $8.6 billion across 926 deals, down from $10.6 billion raised in 2024, according to data analyzed by YourStory Research.
With just three months left in the year, it’s unlikely that the total VC funding in 2025 will surpass 2024’s $13.6 billion. In the third quarter of 2025 alone, VC funding dropped 32% compared to Q3 2024, bringing in $2.8 billion. This also marks a 12.5% decline from the previous quarter, indicating a slowdown in funding activity.
Challenges and Shifts in Investment Focus in Indian Startup Sector in September
The global economic slowdown has continued to affect the flow of capital into Indian startups, with many investors showing caution. While the AI sector continues to dominate funding in countries like the United States, Indian startups in this space remain few, limiting the country’s ability to attract the same level of investment.
Despite the dip, the Indian startup ecosystem showed resilience. September 2025 was a bright spot, with funding surpassing the $1 billion mark for the second consecutive month. Five months in 2025 have seen VC funding of over $1 billion, providing some optimism amidst the broader decline.
Sector-Specific Insights: Fintech Dominates VC Interest
Fintech remains the top performer in terms of funding in India, continuing its dominance as a steady sector of interest for investors. The D2C and healthtech segments also saw solid investment, while late-stage startups raised the most capital in the third quarter. Growth-stage startups, however, faced difficulties in securing funding due to investor wariness.
Mumbai emerged as the top city for VC funding in Q3 2025, followed by Bengaluru and Delhi-NCR. However, cities like Chennai, Hyderabad, and Pune saw comparatively lower funding inflows, indicating that capital is still primarily concentrated in India’s major startup hubs.
While the funding landscape in 2025 appears challenging, Indian startups have shown remarkable resilience. More startups are looking towards public offerings through IPOs, signaling potential growth and opportunities in the coming year. As the year draws to a close, the hope remains that 2026 will bring a shift in fortunes for the Indian startup ecosystem.
