India’s Startup Funding Reaches $11B in 2025 as Investors Exercise More Caution

India’s Evolving Startup Landscape: Investment Trends in 2025

In 2025, India’s startup ecosystem raised approximately $11 billion, yet the number of investor checks saw a notable decline. This shift highlights the increasing selectivity of funding in the world’s third most-financed startup market, diverging from the AI-driven capital concentration observed in the U.S.

Funding Overview: A Year of Selective Investment

Deal-making trends reveal a significant reduction in funding rounds, with a nearly 39% drop to 1,518 deals compared to the previous year, according to Tracxn. While total funding fell by just over 17% to $10.5 billion, the decline in seed-stage funding was more pronounced, plummeting to $1.1 billion—a 30% decrease year-over-year. Late-stage funding also dwindled to $5.5 billion, marking a 26% decline, as investors became more discerning concerning scale, profitability, and exit expectations. Conversely, early-stage funding showed resilience, increasing by 7% to $3.9 billion.

The Resurgence of Early-Stage Funding

Neha Singh, co-founder of Tracxn, noted, “The capital deployment focus has shifted towards early-stage startups,” highlighting a growing confidence in founders demonstrating strong product-market fit and revenue visibility in an increasingly cautious funding landscape.

AI Startups: A Modest Growth Amid Global Trends

The recalibration of capital allocation was starkly evident in the AI sector, where Indian AI startups garnered over $643 million across 100 deals—an increase of 4.1% from the previous year. Most of this funding targeted early and early-growth stages, with early-stage AI funding reaching $273.3 million compared to $260 million for late-stage rounds. This trend aligns with investor preferences for application-led businesses rather than capital-intensive model developments.

Contrasting Funding Landscapes: India vs. the U.S.

In sharp contrast, U.S. AI funding skyrocketed to over $121 billion in 2025 across 765 rounds—a remarkable 141% increase from 2024, predominantly driven by late-stage deals. Prayank Swaroop, a partner at Accel, emphasized that India has yet to see an AI-first company achieving revenues between $40-100 million within a year—an achievement notably occurring overseas.

Investing with Pragmatism: The Deep-Tech Focus

Investors are increasingly directing their funding toward manufacturing and deep-tech sectors, where India poses less competition from global capital and benefits from its talent pool, cost structures, and market access. While AI captures a considerable portion of investor interest, funding is also flowing into consumer, manufacturing, fintech, and deep-tech ventures. Advanced manufacturing has particularly emerged as a promising long-term opportunity, with the number of startups in this sector surging nearly tenfold over the past few years.

Transitioning Consumer Demands: A Surge in On-Demand Services

Rahul Taneja, a partner at Lightspeed, noted that AI startups comprised about 30-40% of Indian deals in 2025, paralleling a rise in consumer-facing companies. This trend reflects changing behaviors among India’s urban populations and the growing demand for faster, more on-demand services, showcasing India’s unique market dynamics.

Investor Participation: The Shift Towards Selectivity

Investor participation in India’s startup ecosystem experienced a significant contraction, with approximately 3,170 investors involved in 2025—a reduction of 53% from the previous year. This stringent selectivity is evident, with a smaller group of repeat backers emerging as dominant players.

Growing Role of Government in Startups

The Indian government has increased its visibility and involvement in the startup realm, announcing a $1.15 billion Fund of Funds and a ₹1 trillion ($12 billion) initiative aimed at fostering innovation in various tech sectors. This growing state participation has the potential to catalyze private capital flows, mitigating risks tied to regulatory uncertainty.

India witnessed a robust exit market with 42 tech IPOs in 2025—a 17% increase from the previous year. Domestic institutional and retail investors have driven much of the demand, alleviating concerns regarding reliance on foreign capital for exits. M&A activity also grew, with acquisitions climbing 7% year-on-year.

Unicorns and the Path Ahead

While the number of new unicorns in India remained steady, startups reached $1 billion valuations with less capital over fewer funding rounds. This trend indicates a shift towards more cautious scaling compared to prior years and global counterparts.

Looking Ahead: An Evolving Startup Ecosystem

As India moves into 2026, challenges remain regarding its position in the global AI race and the potential for late-stage funding. However, the trends of 2025 signal a maturing ecosystem marked by deliberate capital deployment, predictable exits, and a focus on local dynamics shaping growth. India is evolving into a distinctive market with unique opportunities, offering investors a complementary landscape alongside developed regions.

Here are five frequently asked questions (FAQs) about India’s startup funding hitting $11 billion in 2025 as investors become more selective:

FAQ 1: What contributed to the increase in startup funding in India to $11 billion in 2025?

Answer: The increase can be attributed to several factors, including a burgeoning tech ecosystem, growing consumer markets, and government initiatives supporting startups. Additionally, the rise of innovative business models and the digital transformation across various sectors have attracted significant investor interest.

FAQ 2: How are investors becoming more selective in choosing startups?

Answer: Investors are focusing on startups with proven business models, strong financial metrics, and sustainable growth potential. Due diligence processes are becoming more stringent, with emphasis on startups that demonstrate clear pathways to profitability and scalability, especially in a competitive landscape.

FAQ 3: What sectors are attracting the most investment in India’s startup ecosystem?

Answer: Sectors such as fintech, healthtech, e-commerce, and edtech are currently seeing the most investment. Additionally, emerging areas like agritech and sustainability-focused startups are gaining traction as investors look for innovative solutions to address pressing challenges.

FAQ 4: What impact does selective funding have on startups?

Answer: Selective funding means that only the most promising & well-prepared startups will receive investment, which can lead to a higher bar for entry. While it may be challenging for some emerging companies, it can also foster a healthier startup ecosystem with more robust and viable businesses in the long run.

FAQ 5: What should startups do to attract investment in this selective environment?

Answer: Startups should focus on building a strong business model, demonstrating customer traction, and achieving clear financial targets. Developing a compelling value proposition and maintaining transparency with potential investors can significantly enhance their chances of securing funding. Networking and building relationships within the investment community are also essential strategies.

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Google Partners with Accel to Discover India’s Next AI Innovations

Google and Accel Unite to Propel India’s AI Startup Landscape

In a groundbreaking collaboration, Google partners with Accel to discover and finance India’s early-stage AI startups through the Google AI Futures Fund, initiated earlier this year.

Strategic Investment Initiative Unveiled

On Tuesday, Google and Accel announced a partnership that aims to invest up to $2 million in select startups via Accel’s Atoms program, with each party contributing $1 million. The 2026 cohort will specifically target founders in India and the Indian diaspora focused on building AI solutions from day one.

A Vision for AI Development in India

“Our goal is to create AI products that benefit billions of Indians, as well as to empower AI innovations developed in India for the global market,” said Prayank Swaroop, a partner at Accel.

India: A Promising Yet Untapped Market

Boasting the world’s second-largest internet and smartphone user base, India presents immense potential. However, it has yet to produce many companies that challenge the technical limits of AI, with development largely centered in the U.S. and China.

Shifting Dynamics in AI Investment

Recent corporate expansions by giants like OpenAI and Anthropic, along with increasing commitments from global investors, signify a shift. With an expansive mobile-first population and growing cloud infrastructure, India may become a significant player in the AI market if its ecosystem integrates talent and demand into innovative research and products.

Investment Areas and Future Outlook

Swaroop emphasized that investment opportunities could span various domains including creativity, entertainment, coding, and work applications. The firms aim to pinpoint fields where large language models are set to advance over the next 12-24 months, seeking Indian startups innovating in those areas.

Comprehensive Support for Founders

Founders participating in the program will gain access to up to $350,000 in compute credits on Google Cloud, along with early access to cutting-edge models and experimental features from Gemini and DeepMind. Additional support includes collaboration opportunities with Google Labs’ and DeepMind’s research teams, monthly mentorship from Accel partners, and marketing assistance through both companies’ global channels.

The Future of AI Innovation in India

“India has an extraordinary track record of innovation, and we believe its founders will lead the next wave of AI-driven global technology,” stated Jonathan Silber, co-founder and director of the Google AI Futures Fund. “This partnership marks the Fund’s first collaboration of its kind globally, emphasizing our commitment to India’s digital transformation journey.”

Building on Previous Investments

This partnership follows Google’s ambitious $15 billion plan announced to develop a 1-gigawatt data center and AI hub in India, coupled with a $10 billion digitization fund launched in 2020.

A Commitment to Founder Independence

Silber clarified that while Google will have a presence on the cap tables of funded startups, the partnership is not geared towards sales or future acquisitions, but rather focuses on fostering innovation in the AI sector emerging from India.

No Exclusive Ties to Google Products

Swaroop and Silber confirmed there are no restrictions requiring startups to exclusively utilize Google products. “We recognize that other technologies may also be the best fit. Our objective is to establish unique integrations leveraging Google AI technology,” Silber added.

Accelerating Early-Stage Innovation

Accel’s Atoms platform, which launched in 2021, has already supported over 40 companies that raised more than $300 million in follow-on funding. The program has recently expanded to include Indian-origin founders abroad.

Collaboration with Prosus

This new initiative comes on the heels of Accel’s recent partnership with Prosus to co-invest in early-stage Indian startups that aim to create large-scale solutions for the masses.

Focused on Innovation, Not Sales

Silber made it clear that the partnership is not about acquiring new cloud customers but is aimed at facilitating the next wave of AI innovation emerging from India.

Sure! Here are five FAQs based on the collaboration between Google and Accel to identify emerging AI startups in India:

FAQ 1: What is the purpose of the partnership between Google and Accel?

Answer: The partnership aims to identify and support promising AI startups in India. By leveraging Google’s expertise in AI and Accel’s investment acumen, the collaboration seeks to nurture innovative technologies and solutions emerging from the region.

FAQ 2: How will the selected AI startups benefit from this initiative?

Answer: Startups chosen through this initiative will receive mentorship from Google’s technical teams, access to Google Cloud resources, and potential funding from Accel. This support is designed to help them scale their solutions and accelerate their growth paths.

FAQ 3: What criteria will be used to evaluate potential AI startups?

Answer: The evaluation will focus on factors such as innovation in AI technology, market potential, the founding team’s experience, and the uniqueness of the startup’s product or service. Startups that address significant market needs or challenges will be prioritized.

FAQ 4: How can startups apply for this opportunity?

Answer: Startups interested in this initiative can typically apply through a dedicated website or portal set up by Google and Accel. Specific instructions and requirements will be provided to ensure a smooth application process.

FAQ 5: Why is India an attractive market for AI startups?

Answer: India is viewed as a prime hub for AI innovation due to its large pool of tech talent, diverse user base, and rapidly growing digital economy. The country’s unique challenges and opportunities present a fertile ground for innovative AI solutions tailored to local needs and beyond.

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U.S. and Indian Venture Capitalists Join Forces in a $1B+ Initiative to Support India’s Deep Tech Startups

Groundbreaking Alliance Forms to Boost India’s Deep Tech Startups

A coalition of eight prominent U.S. and Indian venture capital and private equity firms, including Accel, Blume Ventures, Celesta Capital, and Premji Invest, has joined forces to invest over $1 billion in India’s deep tech startups over the next decade, enhancing U.S.-India tech collaboration.

Tackling Funding Concerns in India’s Startup Ecosystem

This alliance responds to persistent funding challenges highlighted by Indian Commerce Minister Piyush Goyal, who faced backlash for criticizing local startups for lacking innovation and focusing primarily on food delivery services. In contrast, founders pointed out that access to capital for deep tech ventures is scarce in India. The coalition aims to address these issues by channeling long-term private investment into technologies that have historically struggled for funding.

Unprecedented Collaboration Among Investors

The newly formed India Deep Tech Investment Alliance is notable because it formally unites investors who traditionally compete for deals. While collaboration typically happens on a case-by-case basis, this group is committed to pooling resources and efforts under a unified banner.

Members Commit to Long-Term Investment

The alliance, consisting of Celesta Capital, Accel, Blume Ventures, Gaja Capital, Ideaspring Capital, Premji Invest, Tenacity Ventures, and Venture Catalysts, announced its formation following a ₹1 trillion (approximately $11 billion) Research, Development, and Innovation (RDI) scheme approved by the Indian government aimed at promoting deep tech R&D.

Strategic Focus on Indian-Domiciled Startups

Each member of the alliance will commit private capital over the next 5 to 10 years to support local deep tech startups. As many notable deep tech companies with Indian founders are currently based in the U.S., the new RDI scheme requires local incorporation, which the coalition aims to leverage.

Providing Mentorship and Expanding Networks

Beyond funding, the alliance plans to offer mentorship and networking opportunities to startups, while also assisting portfolio companies with their expansion into the Indian market.

Navigating Geopolitical Challenges

Despite the complex geopolitical landscape, including recent tensions between the U.S. and India, the alliance is optimistic about India’s potential as a startup hub for foundational technologies like AI, semiconductors, and biotech.

Investment Opportunities for U.S. Companies

“India presents a particularly compelling market, not only for local companies but also for U.S. firms looking to expand,” noted Sriram Vishwanathan, founding managing partner at Celesta Capital, highlighting the alliance’s goal to invigorate the Indian startup ecosystem.

Focusing on Early-Stage Startups

The alliance’s initial focus will be on early-stage startups, from seed to Series B funding, with an eye on attracting further participation from both VC and private equity firms in the future.

Engagement with Government Policies

Members of the alliance intend to engage proactively with the Indian government to advocate for favorable policies, aiming to create a unified voice to support industry interests while adhering to RDI conditions.

Potential Risks and Rewards

While the collaborative effort is positioned as beneficial for the deep tech ecosystem, there’s an inherent risk that miscoordination could leave startups facing challenges. Nevertheless, optimism remains high for India’s ability to produce transformative technologies over the next decade.

“The future is bright: ambition, talent, and patient capital are converging to transform the Indian startup landscape,” stated Accel partner Anand Daniel.

Here are five FAQs regarding the U.S. and Indian VCs forming a $1B+ alliance to fund India’s deep tech startups:

FAQ 1: What is the purpose of the $1B+ alliance between U.S. and Indian VCs?

Answer: The alliance aims to fund and support India’s deep tech startups, fostering innovation and growth in sectors such as artificial intelligence, robotics, 5G, and biotechnology. By pooling resources and expertise, the VCs intend to accelerate the development of cutting-edge technologies in India.

FAQ 2: Which specific sectors will the alliance focus on?

Answer: The alliance will primarily concentrate on deep tech sectors, including artificial intelligence, machine learning, robotics, 5G communications, biotechnology, and other advanced technologies that have the potential for significant impact and scalability.

FAQ 3: How will this funding impact Indian startups?

Answer: The partnership is expected to provide significant financial resources, mentorship, and access to global markets, enabling Indian startups to scale their operations, innovate rapidly, and compete on an international level. This could lead to job creation and technological advancements within India.

FAQ 4: Are there any eligibility criteria for startups to secure funding from this alliance?

Answer: While specific criteria may vary, startups typically need to demonstrate innovative technology, scalability potential, a strong business model, and a capable management team. Startups will likely need to apply through designated channels or partners associated with the alliance.

FAQ 5: How can startups apply for funding through this alliance?

Answer: Startups interested in funding from this alliance should prepare a comprehensive business plan and proposal. They can monitor announcements from the participating VCs for application procedures, investment windows, and specific criteria. Networking at industry events and utilizing platforms connected to the alliance may also enhance visibility to potential investors.

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