India's tech start-ups face persistent constraints to scale, three out of four funding deals at seed and early stages, says Nasscom-Zinnov report

Three out of four tech start-up funding deals happen at seed and early-stages in India and while about 85% of seed-stage start-ups don't make it to Series A within five years, many stay at the same stage longer than expected, says the Indian Tech Start-up Report 2025 prepared by industry body Nasscom and consulting firm Zinnov.

The report titled ‘Momentum to Maturity - Indiaʼs Startup Ecosystem at a Strategic Inflection Point’,  notes that  seed-stage tech start-ups account for  about 60–70% of funded tech start-ups every year between 2020 and 2025 indicating sustained tech start-up formation and early funding activity, but limited movement of the overall base into later stage.

The report points out that Series B, Series C, and Post-Series C tech start-ups together remain below 15–20% of the funded base in most years and even during funding upcycles, the ecosystem does not meaningfully broaden at the growth or scale end.

“While absolute funding conditions have fluctuated between 2020 and 2025, the stage-wise mix of funded tech start-ups has remained largely unchanged. This suggests that constraints to scale are persistent, rather than driven by short-term market cycles”, it says.

According to the report, 55-85% of tech start-ups remain at the same funding stage even after 5 years across most funding stages indicating  prolonged difficulty in crossing scale thresholds, rather than rapid shutdowns. “Unfunded and early-stage tech start-ups show the highest drop-off rates, peaking at approximately 18%. Once tech start-ups reach Series C and beyond, failure rates drop sharply to below 10%, indicating greater structural stability”, the report notes.

Delayed commercialization, cautious investor behaviour, and extended decision cycles are seen as the reason for 60–65% of tech start-ups at Series A and B remaining stuck at the same stage, with neither clear scale-up nor exit.  

Analysing the Incubator and Accelerator (I&A) trends, the report says that late-stage commercialization outcomes are low regardless of I&A involvement. “I&A are not influencing the core drivers of commercialization: Only 16% of tech start-ups with incubator or accelerator participation reach Series A and beyond, compared to 22% without I or A involvement. While the difference exists, both outcomes remain structurally low, indicating that I&A participation does not meaningfully change commercialization or scale-up odds”, it says.

The low late-stage conversion even among I&A-backed tech start-ups suggests that most I&A do not systematically enable market adoption. Commercialization depends on customer acquisition, procurement readiness, pricing validation, and sales execution, capabilities that sit largely outside the design and incentives of typical I&A programmes, the report says.

It concludes that India is good at creating new tech start-ups, but underperforms at structured progression into later stages “Funding cycles change the amount of capital available, but not how tech start-ups progress across stages. Institutional support thins during the critical post-incubation transition phase, precisely when scale challenges intensify”, it said.