The Indian startup scene, long driven by ambition and substantial investment, is experiencing a downturn in 2025. Venture capital funding has decreased by 18% in the first nine months compared to the same period in 2024, with startups securing $8.6 billion across 926 deals. With only a quarter left, experts doubt that the year’s funding will surpass the $13.6 billion achieved in 2024.
The July–September quarter was particularly disappointing, with a 32% year-on-year decline in funding, totaling $2.8 billion. Although September saw a slight boost with $1.2 billion raised, the overall trend remains concerning.
Late-stage startups continue to attract the most investment, followed by early-stage companies, while growth-stage funding lags. This could hinder the emergence of new unicorns and slow down global expansion efforts. Fintech remains the most attractive sector, thanks to its strong positioning in digital payments and neobanking.
Despite global enthusiasm for AI investments, Indian AI startups have only attracted $100 million in Q3 2025, highlighting a potential missed opportunity. Geographically, Mumbai leads in attracting funds, followed by Bengaluru and Delhi-NCR, with other cities yet to see significant investment.
The slowdown is attributed to global economic volatility and a shift in investor focus towards AI in the West. Nonetheless, Indian entrepreneurs remain resilient, with many startups pursuing IPOs as an alternative funding route. The future might hold promise if India can harness the global AI trend and expand its funding landscape beyond major cities. For now, the ecosystem remains cautious yet hopeful for a stronger 2026.
