September 4, 2025: Venture capital (VC) funding dropped by 18% compared to the previous year in the Indian startup ecosystem. With a total of $8.6 billion raised in the first nine months, it’s clear that the investment landscape has become more difficult. However, amid these challenges, there are signs of robustness, Indian startups are still managing to secure substantial investments, with some sectors continuing to attract attention.
While the broader trend points to a more cautious investment climate, the underlying strength of India’s entrepreneurial spirit remains intact.
As of September 2025, it seems unlikely that total VC investments in the Indian startup ecosystem will surpass the $13.6 billion raised in 2024. Even with three months remaining in the year, the funding trajectory suggests that the 2025 total may not reach 2024 levels. In Q3 2025, the funding raised totaled $2.8 billion, representing a 32% drop from the same period in 2024, and a 12.5% decrease from Q2 2025.
The decline in funding can largely be attributed to a volatile global macroeconomic environment, which has made venture capital harder to come by. While there is a strong interest in artificial intelligence (AI) startups globally, India has yet to see a substantial inflow of capital in this segment. AI startups, especially in the United States, have attracted significant attention, but in India, the number of AI-driven startups remains limited.
Late-Stage Startups Attract Most Funding in India Despite 2025 Slump
Despite these challenges, September 2025 provided a glimmer of hope, with VC investments surpassing the $1 billion mark for the second consecutive month. Out of the nine months in 2025, five months saw funding exceeding $1 billion, suggesting some stability despite broader market trends.
In the third quarter, late-stage startups raised the highest amount of funding, followed by early-stage and growth-stage companies. The latter, especially the growth-stage startups, have faced challenges in attracting capital, as the risk appetite for investment has been low due to economic uncertainty.
Sector-wise, fintech continued to dominate the VC funding landscape in India, followed by direct-to-consumer (D2C) and healthtech startups. Fintech has proven to be a resilient sector, consistently attracting interest from investors.
Geographically, Mumbai has emerged as the leading destination for VC funding in Q3 2025, followed by Bengaluru and Delhi-NCR. However, cities like Chennai, Hyderabad, and Pune have seen comparatively lower funding inflows, indicating that venture capital is still concentrated in India’s primary startup hubs.
The Indian startup ecosystem remains resilient despite the funding slowdown. While challenges persist, entrepreneurs continue to push forward, adapting to the changing investment landscape. One promising trend is the increasing number of startups exploring the public markets through initial public offerings (IPOs), which could signal a shift in the way Indian startups secure capital.
With the year nearing its end, stakeholders in the ecosystem remain cautiously hopeful that 2026 will bring improved funding conditions, as Indian startups continue to demonstrate resilience in the face of global challenges.
