As India solidifies its position as the world’s third-largest startup ecosystem, the first half of 2025 (H1 2025) has showcased a resilient yet cautious funding landscape. Despite global economic uncertainties, Indian startups have raised approximately $5.7 billion across 904 equity funding rounds, marking a 35.82% decline from the $12 billion raised in H1 2024. This report delves into the key trends, sectoral shifts, regional dynamics, and investor sentiment shaping India’s startup funding in 2025, offering insights for entrepreneurs, investors, and policymakers.
Funding Overview: A Cautious Rebound
The $5.7 billion raised in H1 2025 reflects a cautious yet optimistic recovery from the funding winter that began in 2022. While the total funding is lower than the $12 billion in H1 2024, the ecosystem has shown resilience with a 41% year-on-year (YoY) uptick in Q1 2025, where startups raised $3.1 billion across 232 deals. However, the momentum flattened in Q2, indicating a selective investor approach prioritizing profitability and sustainable growth over hypergrowth models.
Key highlights:
- Deal Volume: 904 equity funding rounds in H1 2025, a significant drop from 1,800 rounds in H1 2024, reflecting a focus on quality over quantity.
- Large Deals: Only five funding rounds crossed the $100 million mark, compared to nine in H2 2024, signaling a decline in mega-deals.
- No New Unicorns: For the first time in recent years, Q1 2025 saw no new unicorns, underscoring a cautious valuation environment.
Sectoral Shifts: Fintech and AI Lead the Charge
The funding distribution in H1 2025 highlights a clear shift toward technology-driven and capital-intensive sectors. Fintech and artificial intelligence (AI) emerged as investor favorites, while traditional sectors like edtech and gaming saw reduced interest.
- Fintech: Fintech startups secured $1.6 billion across 68 deals, a 56% jump from H1 2024, driven by innovations in digital payments, lending, and insurtech. Notable rounds include Zolve’s $251 million and ToneTag’s $78 million. The scrapping of the angel tax and robust digital infrastructure like UPI bolstered investor confidence.
- AI and SaaS: AI startups raised $780.5 million in 2024, with continued momentum in 2025. Impetus Technologies led with a $350 million round, followed by Innovaccer’s $275 million in healthtech AI. SaaS solutions, particularly in enterprise tech, attracted significant capital due to their scalability.
- E-commerce: E-commerce topped deal volume with 109 deals, raising $1.2 billion, more than doubling from H1 2024. Jumbotail’s $120 million round, which made it India’s 124th unicorn, highlighted the sector’s revival.
- Emerging Sectors: Climate tech, electric mobility, and logistics saw steady investments, aligning with national priorities like sustainability and infrastructure development.
Sectors like edtech, which faced layoffs and closures in 2023, continued to struggle, while gaming firms grappled with regulatory scrutiny and tax notices.
Regional Dynamics: Bengaluru Retains the Crown
Bengaluru remains India’s startup funding capital, securing $2.54 billion across 143 deals in H1 2025, accounting for 44.6% of total funds. Delhi-NCR followed with $1.5 billion across 116 deals, narrowing the gap with Bengaluru due to its growing fintech and D2C ecosystems. Mumbai raised $853 million across 80 deals, driven by quick commerce and proptech.
- Delhi-NCR’s Rise: Delhi-based tech firms accounted for 40% of Q1 2025 funding, surpassing Bengaluru’s 21.64%, reflecting regional diversification.
- Emerging Hubs: Tier-2 cities like Chennai, Pune, and Hyderabad saw increased activity, supported by government initiatives like the Startup India Seed Fund Scheme.
Investment Stages: Early and Late Stages Shine
Funding distribution across stages reveals a polarized landscape:
- Early-Stage Funding: Early-stage deals (seed and Series A) remained robust, with 209 deals worth $683 million in Q1 2025. Atomicwork’s $25 million and Geri Care’s $13 million rounds underscored sustained interest in emerging startups.
- Late-Stage Funding: Late-stage ventures raised $1.8 billion in Q1 2025, a 114.54% YoY increase, driven by large rounds like Impetus Technologies and Innovaccer.
- Seed-Stage Decline: Seed funding dropped 55.77% YoY to $157 million in Q1 2025, reflecting investor caution toward unproven ventures.
Mergers and Acquisitions: A Surge in Consolidation
H1 2025 witnessed 201 acquisitions, a 50.98% drop from 410 in 2024, but strategic deals signaled market consolidation. Landmark acquisitions included:
- Magma General’s $516 million acquisition by DS Group and Patanjali Ayurved.
- Hindustan Unilever’s $350 million acquisition of Minimalist.
- Everstone’s $200 million acquisition of Wingify.
M&A activity spiked by 40% in H1 2025 compared to H1 2024, with 52 deals, indicating a focus on strategic exits and portfolio optimization.
IPO Activity: A Cautious Approach
India saw 102 IPOs in H1 2025, a sharp decline from 358 in 2024, reflecting market volatility and regulatory scrutiny. Six startups went public in Q1, including Nukleus and Maxvolt Energy, but none matched the scale of 2021’s IPO boom. Co-working startups like Awfis and Smartworks led the IPO pipeline, with proptech firms like Simpliwork and Table Space preparing for listings.
Investor Sentiment: Quality Over Quantity
Investors in H1 2025 adopted a selective approach, prioritizing startups with strong unit economics and clear paths to profitability. Key investors included:
- Stride Ventures: 47 deals, focusing on growth-stage startups.
- Alteria Capital: 42 deals, with a mix of early and late-stage bets.
- Accel, Blume Ventures, and Peak XV Partners: Top overall investors in Q1 2025.
The scrapping of the angel tax and increased domestic funding from family offices and new accelerators like Lossfunk and Upekkha boosted early-stage investments. However, global investors like the European Union remained dominant, participating in 1,117 funding rounds.
Challenges and Opportunities
Despite the funding rebound, challenges persist:
- Valuation Corrections: Investors are wary of inflated valuations, leading to a focus on sustainable models.
- Global Headwinds: Geopolitical tensions and high interest rates continue to impact capital availability.
- Layoffs and Shutdowns: Layoffs dropped to 200 in January 2025, but earlier years saw significant downsizing, affecting ecosystem morale.
Opportunities include:
- Government Support: The ₹10,000 crore Fund of Funds and extended tax deductions for startups until 2030 provide a strong policy push.
- AI and Climate Tech: Growing investor interest in AI and sustainability offers untapped potential.
- Regional Diversification: Tier-2 and Tier-3 cities are emerging as startup hubs, fostering inclusive growth.
Outlook for H2 2025
The Indian startup ecosystem is projected to raise $14–15 billion in 2025 if current trends continue, driven by AI, fintech, and quick commerce. Experts anticipate a rebound in M&A and IPO activity, fueled by strategic acquisitions and favorable market conditions. However, sustained growth will depend on navigating global economic challenges and maintaining investor confidence in India’s innovation potential.
Conclusion
India’s startup ecosystem in H1 2025 reflects a maturing market, balancing resilience with caution. While funding has declined from 2024 peaks, the focus on profitability, sectoral diversification, and regional growth signals a robust foundation. As the ecosystem evolves, collaboration between founders, investors, and policymakers will be crucial to sustaining India’s position as a global startup powerhouse.
Sources: Data compiled from Tracxn, Inc42, TheKredible, and posts on X.
Last Updated on Tuesday, July 15, 2025 8:50 pm by Ediga vivekanandha Goud
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