July 3, 2025: In a shift that may signal a maturing startup ecosystem rather than a mere slump, India’s venture capital (VC) landscape has cooled significantly in the first half of 2025. Rather than focusing solely on the drop in headline-grabbing mega deals, this decline highlights a broader recalibration, where startup funding is becoming more selective, value-oriented, and wary of macroeconomic instability.
VC investments in Indian startups dived to $5.7 billion, down 11% year-on-year from $6.4 billion in H1 2024 and an even sharper 21% decline compared to H2 2024’s $7.2 billion. Yet, the number of deals has remained relatively stable, suggesting that quantity isn’t the issue, it’s the quality and scale of deals that are under pressure.
This funding deceleration isn’t just about fewer mega rounds; it’s a reflection of deeper investor caution. Only eight startups managed to raise over $100 million during the first half of 2025, including names like Infra. Market, Darwinbox, Zolve, Udaan, and Jumbotail, a stark contrast to previous years that saw double or triple that number in blockbuster deals.
Funding dip fails to dampen deal activity as startups adapt to market uncertainties
Global tensions, including conflict in the Middle East and protectionist policies from the U.S., have amplified the risk environment. Add to that the disruptive, and uncertain, rise of AI across sectors, and VCs are treading carefully, often delaying or resizing commitments until the fog clears.
Despite the overall downturn, deal flow in Indian startups remains consistent: 621 deals in H1 2025 vs. 655 in H1 2024. This suggests early interest and startup creation remain strong, but the scaling up of promising ventures is hitting a funding wall.
Stage-Wise Breakdown Shows Growth Capital Squeeze
Growth-stage investments led the way with $1.9 billion, followed closely by early-stage deals at $1.8 billion. Late-stage startups, which typically attract mega rounds, drew just $1.4 billion, reflecting the lack of big-ticket bets this year.
June 2025 exemplified this hesitation, clocking in just $1 billion in funding, down from $1.45 billion in May, marking a sharp 29% monthly decline.
Fintech, D2C Dominate Sectors; Bengaluru Tops City Rankings
On the sector front, Fintech retained its crown with $1.4 billion in funding, followed by Direct-to-Consumer (D2C) brands at $0.7 billion. Geography-wise, the startup capital Bengaluru led with $2.3 billion, trailed by Delhi-NCR ($1.4 billion) and Mumbai ($1.2 billion). Despite India’s ambitions for wider startup dispersion, cities like Chennai, Pune, and Hyderabad continue to lag behind the top three.
Looking Ahead: Is a Turnaround Possible in H2 2025?
While H1 numbers are sobering, they also suggest a system detox, a move away from hype cycles and toward sustainable, impact-driven innovation. If macro conditions stabilize and clarity emerges around AI’s trajectory, H2 could witness a stronger comeback. But without a rebound in large-value deals, 2025 is on track to underperform 2024 in total funding.
