The Indian startup ecosystem raised nearly $11 billion in 2025, reflecting a complex landscape where investors became increasingly selective about their funding choices. The overall number of startup funding rounds dropped, falling almost 39% from last year’s high. This sudden crash marks a breakthrough change in the mood of investors. Government initiatives, including a significant $1.15 billion Fund of Funds and a new ₹1 trillion ($12 billion) Research, Development, and Innovation scheme, aimed to bolster capital access and stimulate innovation across various sectors.
Early-stage funding showed particular resilience as larger private equity and public market dynamics shifted with technological disruption. It climbed to $3.9 billion, a 7% jump year-over-year, despite a general cooling of late-stage funding. They took bold steps to support the developing tech ecosystem. They co-led a $32 million round in the quantum computing startup QpiAI.
Government Initiatives to Stimulate Growth
On 15 January 2025, the Indian government heralded a new era. In 2021, they created a $1.15 billion Fund of Funds to broaden the access to capital for startups across the country. This new initiative would make targeted investments to get more of these young businesses on a high-growth trajectory.
To further this spirit, the government announced a historic scheme of ₹1 trillion ($12 billion) towards promoting Research, Development and Innovation. Specifically, this initiative focuses on energy transition, quantum computing, robotics, space technology, biotechnology, and artificial intelligence (AI). This single act underscores India’s greater commitment to fostering innovation, and more importantly, ensuring that India stays competitive on the world-stage front.
Prayank Swaroop, investment director at Accenture, highlighted the boom cycle AI startups in India are currently experiencing. He stated,
“We don’t yet have an AI-first company in India, which is $40–$50 million of revenue, if not $100 million, in a year’s time frame, and that is globally happening.”
This singular observation shines a light on the difficulties Indian startups have when attempting to concert themselves as innovators in emergent technology spaces.
Funding Trends and Market Dynamics
Meanwhile, in 2025, early-stage tech startups in India raised more than $15 billion. Yet, they fell victim to a steep drop in the number of funding rounds. In all, the deal count dropped down to 1,518, a shocking 39% drop year over year. Investors, understandably, are getting jittery. Now they’re very discerning about where they deploy their dollars, which speaks to this nationwide trend of confidence waning.
So even though there were fewer deals overall, early-stage AI funding shot up to $273.3 million. At the other end of the spectrum, late-stage rounds raised $260 million worth of investment. Indian AI startups accounted for $643+ million via 100+ deals. That’s a small 4.1% bump from last year. This sign of expansion development in certain sectors highlights the potential that remains even in the heart of a tough environment.
The female-led startup sector faced hurdles. Funding for women-founded tech startups held steady at around $1 billion. This marks a 3% decrease from last year’s numbers. The amount of funding rounds for women-founded startups plummeted by 40%. Meanwhile, first-time women entrepreneurs saw a 36% drop in funding. These trends are a troubling sign that it’s just as difficult as ever for women entrepreneurs to get the funding they need.
M&A Activity and Investor Participation
The India Mergers & Acquisitions (M&A) -Market showed a positive sign in 2025. As a result, deal M&A activity jumped by 7% year-over-year which led to a total of 136 deals for the entire year. This increase signifies that investors are placing a higher bar for new funding rounds. They remain open to premium strategic acquisition opportunities.
India-based investors were a key driver in this development, responsible for almost 50% of the M&A activity. Around 1,500 domestic funds and angel investors were key in fueling this explosive growth. The promise by U.S. and Indian venture capital firms was almost $2 billion to support these deep-tech startups. This partnership is a reflection of demand, a growing commitment to and need for innovative technologies, ideas and solutions that fuel our collective future.
Late-stage funding has come to a near halt, totaling $5.5 billion, a 26% decrease compared to last year. Early-stage funding is still doing well and thriving. This resilience reflects how investors are squeezing more dollars for fewer, more proven, later-stage companies. Some of them acknowledge that the early-stage startups are the critical growth drivers.
Neha Singh emphasized this shift in focus among investors:
“The capital deployment focus has increased towards early-stage startups.”
