Funding falls, but India stays in global top three for tech startups
India’s tech startup sector may be weathering a funding winter, but its global standing remains robust. In the first half of 2025, India ranked as the third-most funded tech startup ecosystem globally, trailing only the United States and the United Kingdom, according to a newly released report by market intelligence firm Tracxn.
Despite a year-on-year dip of 25%, Indian startups raised $4.8 billion between January and June, holding their ground ahead of competitors like Germany and Israel. The report, which tracked both funding volumes and sectoral trends, paints a picture of a maturing and selectively resilient startup ecosystem, navigating turbulent economic conditions.
“While the funding volumes have come down compared to the previous year, India’s tech ecosystem continues to show resilience and maturity,” said Neha Singh, Co-Founder of Tracxn. Singh noted that strong investor interest in sectors such as transportation, retail, and enterprise applications reflects long-term confidence in India’s ability to solve structural challenges.
The decline in funding reflects broader macroeconomic pressures, including inflation, restrictive monetary policy, and geopolitical tensions that have triggered investor caution across emerging markets. According to a separate IVCA-EY report, private equity and venture capital investments in India plummeted 68% year-on-year in May 2025.
At home, the shift in investor sentiment is also shaped by a move away from the “growth-at-all-costs” mindset toward sustainable, revenue-driven business models. This recalibration has significantly impacted deal flows and startup valuations across stages.
The funding gap has revived debate around India’s overdependence on foreign capital. In an interview with PTI, veteran investor and former Infosys executive TV Mohandas Pai warned that inadequate domestic capital, limited R&D investment, and regulatory hurdles were stifling the startup ecosystem’s potential.
“For example, China invested $835 billion in startups and ventures between 2014 and 2024, the US invested $2.32 trillion. We just put in $160 billion, out of which possibly 80% came from overseas,” Pai pointed out. “So local capital is not coming in.”
According to Tracxn’s data, the funding slowdown hit all stages of startup maturity. Seed funding fell to $452 million, nearly half of the total from a year ago. Early-stage startups brought in $1.6 billion, while late-stage companies raised $2.7 billion, both reflecting double-digit declines.
The number of mega-deals—those exceeding $100 million—also declined sharply. Only five such deals were recorded in the first half of 2025, compared to nine in the latter half of 2024 and ten in H1 2024.
However, some outliers made headlines. Erisha E Mobility raised a massive $1 billion in Series D funding, followed by GreenLine’s $275 million Series A and Infra.Market’s $222 million Series F. Spinny and Darwinbox also featured prominently among high-value fundraisers.
Among sectors, transportation and logistics tech emerged as the unexpected leader, pulling in $1.6 billion—a 104% increase from the previous half. While retail tech and enterprise applications also attracted attention, they saw declines year-on-year, raising $1.2 billion and $1.1 billion, respectively.
Public market activity slowed, with 12 Indian startups going public in H1 2025—down from 21 in the same period last year. Among the listed names were Ather Energy, Tankup, SS Innovations International, and Infonative Solutions. Only two unicorns emerged in this period, compared to three in H1 2024, signalling a cautious capital environment.
In contrast to funding trends, mergers and acquisitions surged. A total of 73 M&A transactions were recorded in the first half of 2025, up from 54 a year earlier. Notable deals included DS Group and Patanjali Ayurved’s $516 million acquisition of Magma General Insurance, and HUL’s $350 million purchase of skincare brand Minimalist.
Bengaluru retained its crown as India’s top startup hub, attracting 26% of total funding, followed closely by Delhi at 25%. Among venture firms, Accel emerged as the most active, participating in 30 funding rounds. Blume Ventures added seven new startups to its portfolio during this period.
LetsVenture, AngelList, and Accel led overall activity, while Venture Catalysts, 100X.VC, and Antler dominated in seed-stage rounds. Peak XV Partners, Lightspeed, and Sofina stood out in early and late-stage investments.