In 2025, India’s startup ecosystem raised about $11 billion, but investors became significantly more selective and wrote far fewer checks, illustrating how the third-largest funding market by capital is moving away from the concentrated capital that had previously formed primarily in the United States thanks to artificial intelligence.
According to the analyses, deal activity declined significantly: total funding volume fell by more than 17%, to around $10.5 billion, and the number of rounds decreased by around 39% from the previous year, to 1,518 deals.
The contraction was not evenly distributed: seed funding fell to $1.1 billion in 2025 (−30% compared to 2024), investors became more cautious about more experimental bets. Late-stage funding cooled to $5.5 billion (−26%) due to stricter requirements for scale, profitability and exit pathways. In contrast, early stages showed some resilience, amounting to $3.9 billion (+7%).
“Capital deployment is increasingly focused on early-stage startups. »
Rethinking AI: realignment and priorities
In 2025, Indian AI startups raised just over $643 million in 100 rounds, up 4.1% from the previous year. A significant portion of investment was in early stages of growth: initial funding was $273.3 million and late-stage funding was $260 million, reflecting the focus on applied solutions rather than scaling large models.
In the United States, the situation is radically different: in 2025, investments in AI reached more than $121 billion in 765 rounds, representing an increase of 141% and a focus mainly on late-stage development.
“There is yet to be an AI-focused company in India that has an annual turnover of $40-50 million, or even $100 million – and this is happening globally.”
Priyank Swarup, partner at Accel, told TechCrunch: India has yet to build large foundational models and needs time to develop the research depth, talent and patient capital to compete in this space. Therefore, applied AI and related deep technologies are considered more realistic directions in the short term.
Indirect investment directions: manufacturing and deep technology
Following this, there was an even greater flow of investment in manufacturing and deep technologies. These sectors give India a competitive advantage – talent, lower costs and access to a large local market – and are less prone to over-reliance on global equity.
Although AI is attracting a lot of attention, the distribution of investments in India remains more balanced than in the United States: a significant share is devoted to consumer services, manufacturing, fintech and deep tech. Experts say advanced manufacturing has become a long-term opportunity: Over the past 4-5 years, the number of such startups has increased almost tenfold – a sign that India can build a sustainable lead in certain sectors while maintaining less competition from the global financial market.
Rahul Taneja, partner at Lightspeed, noted that by 2025, AI startups in India accounted for about 30-40% of transactions, but the number of consumer companies is also increasing due to changes in urban consumer behavior, creating demand for fast and reliable services – from fast commerce to home services that better meet India’s needs and growth rate than the Silicon Valley cost model.
India and the United States: different trajectories and their context
PitchBook data highlights the difference in capital distribution between India and the US in 2025: only the US saw venture capital funding reach $89.4 billion in the fourth quarter, while Indian startups raised around $4.2 billion during the same period.
“There is no need to draw direct parallels between India and the United States because population density, labor costs and consumption habits differ, which determines which economic models can evolve.”
According to a Lightspeed representative, the difference does not imply a lack of ambition in India; Consumer decisions are driven by local demand and speed of service, which align with local conditions rather than the Silicon Valley-style demands of global capital.
Governance is starting to play a more visible role. In 2025, the Government of India announced a fund of funds totaling approximately $1.15 billion and a research, development and innovation program totaling approximately $12 billion (rupee equivalent) for priorities in the areas of energy transition, quantum computing, robotics, space, biotechnology and AI, using long-term loans, equity participation and deep technology support.
This government involvement strengthens engagement with the private sector: approximately $2 billion in commitments from U.S. and Indian private equity and venture capital firms, with Nvidia as advisor and Qualcomm Ventures as participant. The government also jointly funded $32 million for quantum startup QpiAI – one of the few direct federal actions in the field.
“One of the biggest risks is regulatory uncertainty; if regulations change, it will affect investors’ decisions.”
Releases and outlook for 2026
In recent years, India has seen a steady stream of technology IPOs: in 2025, 42 technology companies introduced their shares to the market, an increase of 17% from 2024, with domestic demand mainly coming from institutional and retail investors. M&A activity also increased by 7%, to 136 deals. This indicates increasing confidence in local markets and reduced dependence on external capital.
Experts believe that 2025 marked the maturity of the Indian ecosystem: investments are allocated more prudently, exits become more predictable and domestic market dynamics increasingly influence growth rates. For investors, India is gradually being seen no longer as a direct competitor to developed markets, but as an additional arena with a unique risk profile and time horizons.
Overall, 2025 highlighted the maturation of the Indian ecosystem: the value of transactions, focus on practical solutions and active local market development lay the foundation for future growth. In the eyes of investors, India is gradually transforming into a self-sustaining platform complementary to global capital, with its own advantages and challenges.