By Thimmaya Poojary
Copyright yourstory
Venture capital (VC) funding into Indian startups continues to face challenges, with fund inflows in the first nine months of 2025 falling by 18% compared to the sime period in 2024.
The total funding in the nine months of 2025 stood at $8.6 billion across 926 deals. In contrast, during the nine months of 2024, the total funding raised by startups was $10.6 billion, according to analysis of data by YourStory Research.
Going by the current trends, with three months still remaining in the year, it looks unlikely that total VC funding raised by Indian startups in 2025 will surpass 2024 levels. In 2024, the total VC funding for Indian startups stodd at $13.6 billion. The best outcome will be to atleast match the 2024 levels.
Even the quarterly trends do not offer much optimism. In the third quarter of 2025, i.e., months of July, August, and September, the total funding raised was $2.8 billion, a 32% decline when compared to the same period in 2024. On a sequnetial basis, this also marked a 12.5% decline from the second quarter of 2025.
Overall, this does not paint an optimistic picture for the Indian startup ecosystem, as the volatile macroeconomic environment has hindered the flow of capital. In addition, funding is now largely into AI startups, especially in the United States. However, this trend has not been the case in India, where the number of AI startups are very few.
The only positive is that in September, the total VC funding touched $1.2 billion, marking the second consecutive month the figure has crossed the psychological important mark of $1 billion. In the nine months of the year, five out of nine months have recorded VC funding of more than $1 billion.
In the third quarter of 2025, the late stage category raised the highest funding, followed by early stage and then the growth category. The biggest challenge for the Indian startup ecosystem has been the sluggish fund inflow into the growth and late-stage segments.
In terms of sectors that raised funding in the third quarter of 2025, the fintech segment continued to dominate the list, followed by D2C and healthtech. Fintech has consistently remained the evergreen and steady segment that continues to attract VC interest.
Given the current trend in developed economies, where AI startups attract the highest share of funding, India tells a different story. In the third quarter of 2025, the AI segment raised just $100 million in funding.
Mumbai topped the list of funding destinations for the third quarter of 2025, followed by Bengaluru and Delhi-NCR. These trends indicate that VC money is yet to reach other hubs such as Chennai, Hyderabad, and Pune in a substantial way.
Overall, the trends do not paint an optimistic picture for the Indian startup ecosystem. Yet, entrepreneurs continue to demonstrate resilience to weather these challenges. The one bright spot has been the increasing number of startups heading to the public markets through IPOs. Hopefully, 2026 will prove to be a better year.
(Edited by Megha Reddy)
