Indian startups funding surges to US$2.5 billion in Q1 2025, up by 8.7%
Indian startups are picking up the pace, with venture capital (VC) investments rising. Indian tech startups alone raised US$2.5 billion in Q1 2025. This is an 8.7% jump from last year and a 13.64% jump from the previous quarter. The return is a sign of renewed investor confidence. Let’s explore whether it may be a short-term bounce back or a longer-term change for Indian startup funding.
What’s Behind the Growth?
Late-Stage Confidence
Investors are favoring late-stage companies, investing US$1.8 billion in them, up from US$1.3 billion during Q4 FY24. The trend reflects the preference for solid business models rather than high-risk early-stage firms.
Sectoral Surge
A few sectors saw good funding expansion:
Auto Tech: From US$214.6 million in Q4 FY24 to US$1.1 billion in Q1 FY25, this is a fourfold surge.
Enterprise Applications: Up by 21.94% to US$650.7 million.
Retail Tech: Grew by 21.67% to US$481.5 million.
City-Wide Growth: Delhi Overtakes Bengaluru
Indian startups in Delhi received 40% of overall funding, which is higher than Bengaluru’s 21.64%. Although this trend is notable, only time will tell if Delhi will be able to maintain its position as India’s startup capital.
No New Unicorns: Why?
Despite the boom in funding, no new unicorns were created during Q1 FY25, unlike Q1 FY24. During the latter, two unicorns were created. It shows that investors now prioritize profitability over overinflated valuations. Rather than pursuing unicorn status, startups are turning to IPOs and mergers. During Q1 FY25, six IPOs, and 38 acquisitions were seen, reflecting a change in exit strategies.
Who’s Investing?
The examples of the top investors in startups of various stages are as follows:
Late-Stage: Avataar Ventures, Sofina.
Early-Stage: Accel, Peak XV Partners, Vertex Ventures.
Seed-Stage: Venture Catalysts, Unicorn India Ventures, YourNest.
IPO 2025 & M&A Activity Surge
Zepto, a fast commerce company, is in discussions for a US$250 million secondary sale of shares to enhance Indian investor ownership prior to its IPO. ESDS Software is going to raise ₹700 crore via an IPO to increase its AI-powered GPU cloud.
ATC Energies System’s IPO, which was opened on March 25, 2025, is seeking to raise ₹63.76 crore. The firm, which deals in lithium-ion batteries, received a 53% subscription on Day 1. Its listing on April 2 will be keenly observed.
Venture Capital Rebound
As per the India VC Report 2025 by Bain & Company and the Indian Venture and Alternate Capital Association (IVCA), VC investment in India totaled US$13.7 billion in 2024, a 1.4x growth over 2023. Deal volume also grew 45%, at 1,270 deals in 2024, up from 880 deals in 2023. Big deals (US$50M+) came close to doubling, reflecting revived interest in high-growth enterprises.
Consumer Tech & AI Lead the Way
Consumer Tech: Investments jumped 2.3x to US$5.4 billion, led by quick commerce, gaming, edtech, and travel tech. Zepto alone raised US$1.4 billion.
SaaS & AI: SaaS funding increased 1.2x to US$1.7 billion, while generative AI investments increased 1.5x. The attention is now moving from AI infrastructure to AI applications.
Traditional Sectors Gain Ground
BFSI: Investments jumped 3.5x to US$1.1 billion, led by NBFCs in housing finance and MSME lending.
Consumer & Retail: Investment doubled to US$0.9 billion, with premium brands and D2C startups picking up pace.
Exit Strategies & Market Liquidity
Investor exits increased to US$6.8 billion in 2024, of which 76% was through IPOs. A number of startups such as Meesho and Zepto are re-domiciling in India for IPOs, taking advantage of streamlined regulatory processes that have reduced IPO preparation time from 12–18 months to a mere 3–4 months.
Fundraising Slowdown
Despite the high level of investment activity, fundraising fell by 35% to US$2.7 billion, the lowest since 2020. Still, the fact that there is unallocated capital indicates a good investment cycle coming up. Family offices and corporate VCs are making more deals, especially with Tier 2 and Tier 3 startups.
Regulatory Reforms & 2025 Outlook
Major policy reforms influencing the investment environment:
- The abolition of the angel tax increased early-stage investments.
- Cut in LTCG tax-enhanced investor returns.
- Simplified FVCI registration boosted foreign access to Indian markets.
With a strong digital infrastructure, rising consumer demand, and pro-business policies, India’s startup ecosystem is ready for lasting growth. The transition to profitability, investments in deep tech, and scalable business models will decide if this rebound is the beginning of a long-term boom.
