India’s startup funding rebounds; will the recovery last in 2025?

VENTURE CAPITAL (VC) funding in the Indian startup landscape saw a recovery in 2024, signalling the end of the so-called “funding winter” that has shadowed the ecosystem since 2021. Witnessing a marginal revival, the ecosystem saw total investments cross $11.6 billion — a 5.4% jump from $11 billion in 2023. The number of VC deals rose 6% to 1,168 from 1,102, exhibiting confidence in India’s startup ecosystem despite global headwinds.

The year also saw a shift towards profitability and sustainable scaling from the growth-at-all-costs strategy seen in the previous years. However, despite a surge in overall funding, growth-stage funding and M&A deals dropped, showing the industry is not fully out of the woods yet.

India remained the fourth-highest funded country in 2024, with the U.S., the U.K. and China leading the pack. While early- and late-stage funding surged 6.29% and 8.14%, respectively, the seed stage fell 19.36% year-on-year to $1.08 billion. The average value of a VC deal also grew to $10 million in 2024 from $7 million in 2023, while deals valued over $100 million increased to 21 from 14.

“Though funding trends have not shown many signs of recovery, the Indian tech startup ecosystem has witnessed a slight uptick in 2024, with founders shifting focus towards improving unit economics and profitability, boosting investor confidence,” says Neha Singh, founder of market intelligence firm Tracxn.

Retail, enterprise applications, and fintech were the top-funded sectors in India’s tech ecosystem in 2024, says Singh. Together with private equity funding, PE/VC investments topped $56 billion in 2024, a 5% increase from 2023. The number of deals also grew 54% year-on-year to a record-breaking 1,352, with infrastructure ($12.1 billion), financial services ($9 billion), and real estate ($8.8 billion), leading the surge. “Despite the backdrop of geopolitical uncertainties, depreciating currency, stretched valuations and market volatility, the resilience of India’s economic expansion has driven a rise in PE/VC activity,” says Vivek Soni, partner and national leader for PE services at professional services firm EY India.

Key drivers of funding rebound

Quick commerce led the funding race, with $1.37 billion equity funding across seven rounds, largely fuelled by Zepto’s $1.4 billion fundraising across three major rounds. “Our business was Ebitda positive in Q1FY25. We recently raised $1 billion. Instead of reporting short-term profitability, we decided to expand dark stores (currently 639). Ebitda will fluctuate but we will be back to profitability once the stores mature,” says Aadit Palicha, CEO and co-founder, Zepto. Other significant deals include Meesho raising $300 million, PharmEasy securing $216 million, and PhysicsWallah receiving $210 million.

The year 2024 also saw sectoral diversification, with investors shifting focus towards high-growth sectors such as fintech, enterprise tech, e-commerce, cleantech, artificial intelligence, healthtech and deeptech. “This diversification broadened the funding landscape and encouraged new industry players to attract substantial investments. Another major contributor was the increase in both seed- and late-stage funding, which rose by 25% and 31%, respectively,” says Madhur Nevatia, partner at Longhouse Consulting, a Careernet company.

Additionally, government initiatives and regulatory reforms bolstered investor confidence. The abolition of the angel tax, along with the $1.25 billion IndiaAI Mission, aimed at boosting AI infra, improved startup funding prospects. Regulatory reforms also streamlined processes for startups to return to India from overseas, facilitating easier access to capital markets. Thanks to these measures, startups such as PhonePe, Groww, and Zepto shifted their domicile back to India in 2024, a process termed as “reverse flipping”. Others are also in the process of shifting base to the country.

Startups received a key mention in this year’s Budget as well, with support of ₹10,000 crore to the Fund of Funds. The 2016 Fund of Funds has contributed to 140-plus Alternative Investment Funds (AIFs), supporting 1,100-plus startups. The Budget also extended the 100% tax deduction benefit for startups incorporated till April 1, 2030, from the earlier deadline of April 1, 2025.

As funding increased, India’s share also improved globally. “The dent in investor sentiment that the market experienced for the past few years seems to have faded, with the renewed appetite for big-ticket deals further underscoring this recovery. The rise in big-ticket deals and India’s share of global VC investments highlight the country’s expanding influence in the startup ecosystem,” says Aurojyoti Bose, lead analyst at U.K.-based market intelligence firm GlobalData.

Focus on sustainability

There were 1,601 key funding rounds in 2024, with Purplle, Eruditus, Credit Saison, Whatfix, Pocket FM, and Mintifi securing funding worth over $100 million each. Industry stakeholders say that while investors remain selective, the shift from growth-at-all-costs to profitability and sustainable scaling was evident in 2024. As founders adapted to changing investor priorities, 2024 set the stage for a more resilient, value-driven startup ecosystem in 2025.

“Private capital funding into new-age businesses recovered last year, with an increase in fund deployment compared to 2023; exits continued their recent trend, with another year of growth. This resurgence signals that the funding winter has thawed. While valuations remained stretched, investor confidence in the ability of strong performers to grow into their valuations has returned,” says Vikas Choudhury, founder & MD, Playbook Partners. The Mumbai-based equity investment firm under Choudhury, a former president of Reliance Jio, launched its maiden fund with an initial close of $130 million in September 2024, aiming for a total fund size of $250 million. Its portfolio includes Myntra, InMobi, Rapido, Fractal Analytics, and Khatabook, among others.

In October 2024, Purplle, an omnichannel beauty platform based in Mumbai, concluded its Series F funding round, raising $180 million. The round was led by a subsidiary of the Abu Dhabi Investment Authority (ADIA), with participation from Premji Invest and Blume Ventures. Bengaluru-based Pocket FM raised $103 million in Series D in March 2024 from Lightspeed India and StepStone Group. “The funding landscape in 2024 has been dynamic... we have always approached capital-raising with a long-term vision, ensuring we align with partners who not only provide financial backing but also share our belief in the transformative power of audio entertainment,” says Anurag Sharma, CFO, Pocket FM.

In 2024, the market saw a selective approach to funding, favouring sustainable growth, clear monetisation strategies, and strong unit economics. Pocket FM believes its fundamentals remain strong. “We focussed on highlighting our proven engagement metrics, prioritisation of AI, and global expansion strategy to differentiate ourselves in an increasingly competitive space,” says Sharma.

For some, despite an increase in investment, 2024 marked a challenging year. B2B digital adoption platform Whatfix raised $125 million in a Series E funding round led by Warburg Pincus, with existing investor SoftBank Vision Fund 2.

Khadim Batti, co-founder & CEO of Whatfix, says 2024 was a challenging funding environment for Indian startups. “Raising capital became more demanding as investors focussed on sustainable growth. Profitability, efficiency, and long-term resilience took precedence, requiring startups to demonstrate disciplined execution and financial stability.”

VCs emphasised financial discipline, scrutinising unit economics, enterprise adoption, and retention metrics, says Batti. “Whatfix’s revenue from existing customers grew to 123%, and for enterprise customers, it rose to 132% over the last two years, showing stronger engagement and deeper product integration. The surge in AI-driven investments was a boon, as our GenAI-powered product suite enhances enterprise productivity, reduces IT costs, and accelerates software adoption,” he says.

For edtech startups like Bhanzu, which has received $33.7 million across three funding rounds, the landscape shifted from prioritising top-line growth to demanding balanced, sustainable profitability. The Hyderabad-based startup says it simplified operations, improved teamwork, increased efficiency, grew its profits, and gained investor confidence, which helped it close a $16.5 million Series B funding round in November 2024. “As the company scales, Bhanzu remains anchored in core fundamentals that ensure growth is both impactful and sustainable,” says Neelakantha Bhanu, CEO and founder, Bhanzu.

Some startups like B2B platform Infra.Market, which focusses on revenue generation and profitability, say business has been great with strong demand. Its December 2024 funding round saw higher-than-anticipated investor interest. Infra.Market, which recorded ₹379 crore profit in FY24 and revenue worth ₹14,530 crore, has raised $751 million in total funding, with $121 million secured in January 2025 at a valuation of $2.8 billion. “India remains a pretty hot spot for any kind of equity investment. Be it in the startup world or even in regular capital markets, the opportunity that India offers is phenomenal,” says Aaditya Sharda, co-founder, Infra.Market.

Sharda says India offers great investment opportunities, with strong economic growth, rising consumption, and government support through initiatives — including Make in India and Viksit Bharat — creating a favourable environment for entrepreneurs to grow businesses, raise capital, and generate wealth.

Consumer, foodtech lead the pack

In 2024, India’s startup ecosystem showed strong revenue growth across sectors, with consumer and foodtech leading the way, Tracxn data shows. There was high consumer demand and market expansion in digital-first brands and food delivery platforms. Fintech followed closely as companies expanded offerings including digital payments, neobanking, and lending solutions.

“The overall funding cycle remains normal and is expected to rise as VCs, having raised significant capital, face pressure to expand portfolios. With China closed and Europe too small, India emerges a key investment destination,” says K. Ganesh, serial entrepreneur and promoter, BigBasket, BlueStone, HomeLane & Portea Medical.

Ganesh thinks in the short term, GenAI and agentic AI will attract early-stage funding, while deeptech, spacetech, and manufacturing (boosted by the PLI scheme) will see strong investments. “Clean energy, battery swapping, and recycling will drive mid-stage funding, with preventive healthcare gaining interest,” he says.

Despite rising revenues and uptick in funding, 12 startups including Koo, Bluelearn, Toplyne, GoldPe, Kenko, Stoa, among others, shut shop in 2024, a slight dip from 15 in 2023, highlighting that longevity isn’t just about funding but building a sustainable model. Early stage startups such as Indrajaal are avoiding such traps by diversifying. “We’ve focussed on long-term stability by diversifying revenue through defence contracts, enterprise partnerships, and international expansion,” says Vamsi Vellanki, executive director, corporate affairs, Indrajaal Drone Defence India.

Anil Joshi, founder and managing partner, at Unicorn India Ventures, says early-stage ventures have a 30-50% failure rate. “We’ve seen failures, but there are equally strong success stories. In alternative investments, a portfolio approach matters more than individual failures.”

Investor confidence up

Startups hired around 178,000 people in 2024, taking the overall headcount to 1.55 million. Recent achievements in space exploration, increased focus on Make in India, rising disposable incomes, and the rapid increase in urbanisation have paved the way for new business models such as quick commerce, which has contributed to increased activity, says Singh of Tracxn, reiterating that to boost investor confidence, founders are focussing on profitability and unit economics.

After significant growth in 2024, startups hope 2025 will be a defining year as investor interest is on the rebound and emerging sectors are set to attract higher investments. “In 2025, AI, climatetech, cleantech, deeptech, spacetech, medtech, along with healthtech, fintech and consumertech are expected to dominate the investment landscape,” says Nevatia of Longhouse.

This year will be better than the previous year, says Joshi of Unicorn India Ventures, adding, consumer Internet businesses will continue to attract investor interest as they scale fast. “We have seen positive inclination on supporting deeptech ventures in the space of AI, spacetech, defence tech etc; and we are confident that the same will grow as we see more successful ventures in the deeptech space.”

As investor confidence rebounds, and startups face new challenges and focus on profitability, it remains to be seen how 2025 will pan out for India’s startup ecosystem.