Is India heading towards a venture capital winter this year?

Are Indian startups heading for an extended funding winter this year?  According to a recent CB Insights report, 2025 saw 653 deals amounting to a total funding of $5.7 billion, which, when compared to year-on-year performance, is a 21% drop in deal numbers. In comparison, CY2024 a total funding of $11.1 billion. If this pace continues, the VC performance may miss or barely make it to CY2024 numbers and would be on the path of hitting a five-year low in venture capital funding. Without a turnaround in the second half, the startup ecosystem could stare at a cold, long venture capital winter.

The COVID-19 pandemic created havoc for traditional sectors like airlines, automobiles, and hospitality in 2021, it also created an opportunity for the startup community to flourish. India too saw an evolution in the startup ecosystem, with tech startups becoming major beneficiaries of big-ticket investments. In that year alone, there were more than 2100 deals that raised a staggering $30 billion—a record that remains to be broken. Notable companies that saw big investments were Flipkart, which raised $3.6 billion; $502 million by Mohalla Tech (ShareChat), $500 million by Zomato. Even Byju's, which is now processing its insolvency, too has secured $460 million in Series F round, which upped its valuation to $13 billion. Companies like CRED and Urban Company also secured capital through multiple rounds to reach a valuation above $2 billion. 

While 2022 saw a small dip, 2023 saw deal numbers come down nearly by half and its cumulative funding was slashed by two-thirds. Since then, it has been an uphill battle to lift the numbers, charts remain stubbornly flat. The current Indian VC scene is defined by fewer but larger bets. For the year, the largest deal funding was $275 million, raised by Essar's green logistics arm, GreenLine Mobility Solutions, with Zerodha's co-founder Nikhil Kamath signing off $20 million to contribute to the company's expansion plans. IPO-bound Groww raised $200 million, and Jumbotail, a B2B e-commerce company, raised $120 million. The tech sector again championed itself as favourable to venture capitalists, with e-commerce and fintech taking home the larger share of the funding.

Yet there wasn't any big-billion ticket size this year, and even the top deals that bagged millions do not total a billion dollars. What used to be fertile grounds for seed-stage activity for the startup ecosystem, has now become a barren land, with many deals seeing late-stage rounds.

The global trend, however, tells a different tale. Global venture funding reached $94.6 billion in Q2 of 2025, marking the second-highest total since the second quarter of 2022 and continuing a three-quarter streak above the $90 billion mark. Yet, this surge in capital masks a significant contraction in activity, as deal volume fell 9% from the previous quarter to just 6,028 deals, hitting the lowest since Q4 of 2016, thereby highlighting the risk-aversive investor behaviour.

One of the most significant shifts underway is the rise of hard tech. In Q2 of 2025, hard tech companies claimed six of the ten largest global deals, pulling in $8.7 billion in funding. Companies such as World View raised $2.6 billion, $2.5 billion by Anduril, and Montera Infrastructure saw $1.5 billion, all after multiple rounds of fundraising. This change in behaviour could be attributed to finding new avenues to invest amidst geopolitical tensions. Although this shows a change in venture capitalists' interests, AI and AI-related tech companies still continue to woo investors. Giants like Meta are investing $14.3 billion in AI development companies like Scale AI, with Elon Musk's xAI trailing in a distant second, which still raised $5 billion, creating a sizable slice in the global funding pie.

But India is missing out on these mega moves. VC is still focused on strong verticals like fintech and e-commerce, there is no new upcoming sector that the country sees itself invest in. If the second half does not bring a dramatic upswing in deals and funding, India is truly going to shudder in the VC winter.