Even as VC fund launches soar past 2024 levels, startup investments remain muted. Here’s why early-stage ventures are getting all the love in 2025.
Record Fund Launches, But Sluggish Startup Funding
India’s startup ecosystem is seeing an unusual divergence in 2025. While startup fundraising remains subdued, with just $2.1 Bn raised in Q3 (down 38% YoY), investors have launched over $9 Bn worth of funds in the first nine months—already surpassing 2024’s full-year total of $8.7 Bn.
In Q3 alone, $2.5 Bn across 25 new funds were announced. Surprisingly, this capital surge is not yet translating into startup deal flow, raising the question: where is this money really going?
The Shift to Early-Stage Betting
The answer lies in a clear strategic pivot. Most funds are now targeting early-stage startups—specifically at the seed and Series A levels.
- 60% of new fund launches in 2025 are aimed at early-stage rounds
- 58% of surveyed investors expect angel, pre-seed, and seed startups to dominate allocations in 2026
- Only 3% of projected 2026 investments are expected in late-stage or pre-IPO startups
This marks a dramatic recalibration of India’s funding ecosystem toward young, high-growth potential ventures, while large cheque sizes are being withheld from mature players.
Investor Sentiment: Belief in the Builders
The Indian Startup Investor Survey Q3 2025 underlined a key insight: while capital inflow remains healthy, investors are more cautious about unit economics and valuations—especially in later-stage deals.
Instead, they are backing:
- Founders building in AI, deeptech, and sustainability
- Startups with longer runways and scalable business models
- Early-stage players who can still be shaped, guided, and mentored
This is also reflected in the rise of micro-VCs and early-stage accelerators, such as 888VC, Zeropearl VC, and Atomic Capital, all of whom closed maiden or follow-on funds in 2025.
Top Fund Launches of 2025 (So Far)
Here’s a snapshot of the top 10 funds by size launched this year:
| VC/PE Firm | Fund Size | Focus |
|---|---|---|
| A91 Partners | $665 Mn | Growth-stage (consumer, tech, financial services) |
| Accel India VIII | $650 Mn | Early-stage (tech, SaaS, consumer) |
| Multiples PE | $430 Mn | Growth & late-stage |
| Elevation Holdings | $400 Mn | Late-stage, IPO-ready startups |
| L Catterton India Fund | $200 Mn (first close) | Mid-market consumer brands |
| HealthKois | $300 Mn | Healthtech & medtech |
| Bessemer India II | $350 Mn | Early-stage (AI, SaaS, fintech) |
| Avendus FLF III | ₹850 Cr (~$102 Mn first close) | Growth & mid-market leaders |
| HealthQuad III (Quadria) | $300 Mn | Healthcare innovation |
| Bharat Value Fund III | ₹1,250 Cr (~$144 Mn first close) | Pre-IPO, asset-backed firms |
These funds reflect a sectoral focus on AI, healthcare, and consumer brands, with a strong interest in IPO-readiness and future-proof business models.
What’s Driving This Boom in Fund Formation?
Several factors are at play:
- Dry Powder Rebalancing: Funds that held back during the funding winter of 2022–23 are now deploying with a revised thesis.
- Valuation Correction: A more disciplined funding environment makes early-stage bets more attractive in terms of pricing.
- Strategic Independence: Many funds are India-specific, signalling long-term belief in the local ecosystem’s upside.
- Policy Tailwinds: Government initiatives in AI, deeptech, and manufacturing are helping channel capital into high-priority areas.
But Why Is Startup Fundraising Still Low?
Despite ample capital, startup investments haven’t kept pace, especially in late-stage rounds. Several reasons explain this:
- Conservative Due Diligence: Investors are looking for clearer paths to profitability and product-market fit before deploying capital.
- Saturation in Growth-Stage Startups: Many unicorns are still recovering from overfunding and misaligned valuations during the 2021–22 bull run.
- Uncertain IPO Markets: With mixed post-listing performances, many funds are taking a “wait-and-watch” stance on mature tech startups.
