India's startup ecosystem witnessed a significant recalibration in 2025, with total funding reaching approximately $11 billion. This figure represents a decrease from the $12 billion recorded in the previous year. Despite the dip in overall funding, the Indian venture capital market has strengthened its global standing, demonstrating year-on-year double-digit growth in both deal volumes and values during January-November, even amidst persistent volatility across major economies.
The reduction in capital deployed occurred across fewer deals, signaling a notable shift in investor sentiment. In 2025, 936 deals were sealed, down from 993 in the prior year, as investors grew more cautious and selective. This risk aversion is largely attributed to uncertainties surrounding profitable exits and increased scrutiny on startup valuations. Investors are now prioritizing founders with demonstrated execution experience and well-defined exit strategies.
While the total funding saw a slight decrease, the average funding in the last eight weeks stands at around $243.39 million with 25 deals per week. Although overall funding dipped, the count of mega-deals, those exceeding $100 million, decreased to 18 from 24 last year. However, the total capital deployed through these large-ticket investments nearly doubled, making 2025 a strong year for such transactions outside the post-pandemic outlier of 2021. Companies like PhonePe and Zepto were prominent recipients, securing multiple large funding rounds.
Interestingly, while venture capital funding values declined in China and the UK, India continued to post growth. India accounted for around 8% share of the total number of VC deals announced globally during January-November 2025, while its share of the global value stood at around 4%.
Several factors have contributed to India's resilient growth, including a robust digital infrastructure, a burgeoning middle class, and a favorable regulatory environment that encourages entrepreneurship. Furthermore, the rise of domestic capital has been a key trend, with approximately 39% of new funds having a fully domestic Limited Partner (LP) base, compared to 20% two years prior. These local LPs are more governance-sensitive and focused on near-term cash yields, which has pushed General Partners (GPs) towards smaller, more specialized funds targeting sectors like AI, climate, defense, and agriculture.
Looking ahead, India's venture capital ecosystem is expected to enter a more selective growth phase, with capital concentrating on scalable, revenue-generating startups. As global investors rebalance portfolios amid macroeconomic uncertainty, India is poised to benefit from its market depth, digital adoption, and policy continuity, potentially driving larger ticket sizes and deeper sectoral specialization in 2026 and beyond. Funding activity is expected to improve in 2026, supported by capital recycling following exits, new fund launches, and increased interest from limited partners. Artificial intelligence is expected to remain a key area of investor focus, alongside consumer-facing businesses, including direct-to-consumer brands and services.
