Karnataka’s tech startup ecosystem experienced a significant 30% decline in funding during the first half of 2025, raising $1.7 billion compared to $2.4 billion in the latter half of 2024. This downturn mirrors a broader trend of reduced investment across India’s venture landscape.
Breaking down the funding by stages, seed funding fell to $141 million, a 39% decrease from the previous half and 41% lower than the same period last year. Early-stage funding saw a slight rise, reaching $611 million, marking a 15% quarter-on-quarter increase, although it remained 3% lower year-on-year. Late-stage funding dropped sharply to $930 million, down 44% from the previous half and 56% from the first half of 2024.
In the first quarter of 2025, startups in Karnataka raised $633 million, reflecting a 23% decline from the fourth quarter of 2024 and a 46% drop from the first quarter of 2024. Seed funding reached $57.3 million, a 14% decrease from the previous quarter and a 55% year-over-year decline. Early-stage funding increased modestly to $294 million, a 34% quarter-on-quarter rise but 14% below the previous year’s first quarter. Late-stage funding plummeted to $282 million, a 48% quarter-on-quarter and 60% year-over-year decrease. Notably, no $100 million+ rounds or unicorns emerged in the first quarter of 2025, contrasting with two unicorns in the same period in 2024. However, mergers and acquisitions surged, with 21 acquisitions marking a 91% increase over both the previous quarter and the same period last year.
Despite the overall funding dip, the fintech sector showed resilience, raising approximately $701 million in the first half of the year, a 255% increase from the latter half of 2024 and a 57% rise from the first half of 2024. Enterprise applications secured $619 million, showing a slight year-over-year increase, while retail startups garnered $542 million, a 27% increase from the latter half of 2024 but nearly half of the funding from the first half of 2024.
Bengaluru continued to dominate the funding landscape, accounting for over 99% of the ecosystem’s funding, reinforcing its status as Karnataka’s tech capital. Other cities like Hubli contributed minimally.
Key investors in the ecosystem included Accel, AngelList, and LetsVenture. At the seed level, 100X.VC, Venture Catalysts, and Antler were the most active. Accel, Alteria Capital, and Peak XV led early-stage rounds, while Think Investments, M&G, and Mars Growth Capital were prominent in the growth stage. Despite the funding slump, some venture capitalists see opportunities in early-stage deals. Ninad Karpe of 100X.VC noted that pitch pipelines remain robust, while Dr. Apoorva Ranjan Sharma of Venture Catalysts highlighted Karnataka’s continued appeal due to its innovation capacity and talent depth.
This significant decline in funding reflects a broader investor caution across India, driven by macroeconomic challenges, post-pandemic valuation corrections, and slower fund deployments. However, Bengaluru remains at the heart of the ecosystem, and resilient sectors like fintech and enterprise tech are driving limited growth. The absence of large funding rounds and unicorn creation marks a shift from previous cycles.
Looking forward, while funding activity has cooled, industry experts believe this presents an opportunity for more sustainable startup development. Continued activity at the seed and early stages, along with ongoing mergers and acquisitions, suggests a shift towards long-term viability and profitability over unchecked growth.
