India’s startup ecosystem saw a sharp drop in venture capital and private equity inflows in Q2 2025, with total funding falling to $3.33 billion across 299 deals — the lowest since Q1 2024, according to the latest report by DealStreetAsia – DATA VANTAGE.
Funding was down 20% from $4.18 billion in Q1 2025 and nearly 36% lower than the $5.19 billion raised in Q2 2024, highlighting both sequential and annual slowdowns, according to the India Deal Review: Q2 2025.
The number of high-value investments also dropped in Q2. While the number of megadeals — defined as transactions worth $100 million or more — remained steady at seven in both Q1 and Q2, the total value of these deals declined from $1.34 billion to $1 billion. The funding slump reflects investor caution, with startups facing longer fundraising cycles, tighter capital, and pressure to prioritise profitability.
Despite the downturn, financial services, retail, and software sectors continued to attract significant investor interest, emerging as the top-funded industries in the quarter.
The financial services industry — led by the Groww deal — scooped up $748.6 million across 45 transactions. Other prominent deals within the industry included CRED ($72 million), Sarathi Finance ($55 million), Aspora ($53 million), FlexiLoans ($44 million), Scapia ($40 million), and Infinity Corp ($40 million).
Retail emerged as the second-most funded sector in Q2, attracting $485.5 million across 33 deals. The largest transaction in the space was Jumbotail’s $120-million funding round. Meanwhile, software slipped to third place from first, securing a total of $261.2 million from 27 deals.
Together, the top three industries secured nearly $1.5 billion, or 45% of the quarter’s funding value.
E-commerce took the lead as the most funded vertical in Q2 2025, securing a total of $873.2 million across 81 deals — significantly up from $546.5 million raised through 86 deals in Q1. Spinny topped the charts with a combined $161.6 million raised across two funding rounds.
By stage, growth-stage investments — classified as Series B or later rounds (including private equity and pre-IPO rounds) — dominated funding in Q2, accounting for approximately 59% of the total deal value, up from 56% in Q1. These companies collectively raised $1.97 billion from 28 deals in the second quarter, down 15.8% from $2.34 billion in Q1.
Early-stage funding rose in Q2, with pre-seed and seed startups raising $196.3 million across 100 deals — up from $173.4 million in Q1.
In a city-wise breakup, Bengaluru, Mumbai, and Gurugram remained the top three cities for venture capital investment in India during Q2 2025, collectively accounting for 188 deals worth $2.42 billion, a marginal drop from $2.5 billion raised across 208 deals in Q1.
Bengaluru led the pack, attracting $1.46 billion in funding — 44% of the total capital raised by Indian startups in the quarter. Gurugram ranked second, with total funding marginally growing to $512.5 million from $510.2 million in the previous quarter.
Notably, Thane climbed to the fourth spot, rising from ninth in the previous quarter. Delhi moved up to the fifth place, despite a marginal drop in funding to $149 million in the second quarter.
Venture capital firm Inflection Point Ventures emerged as the top investor in Q2 with a total of 13 investments. The firm co-led investments in 11 startups including DaveAI, Ziniosa, Jobizo, That Sassy Thing, Feline Spirits, IOM Bioworks, DriverShaab, NapTapGo, Vividobots, The Tarzan Way, and Darwix AI.
“Looking ahead, we expect the fundraising environment to remain cautious but gradually improve as global macro factors stabilise and investor confidence returns. The consistency of megadeals is a clear indicator of confidence in companies building towards an Indian IPO and reflects the enhanced maturity of the ecosystem. Sectors that allow startups to demonstrate strong fundamentals and profitability, such as financial services, consumer, manufacturing, and software, will continue to attract capital more selectively. The significant volume of domestic dry powder is expected to be deployed into startups that exhibit focused execution and clear value creation,” said Pranav Pai, founding partner, 3one4 Capital.
The India Deal Review: Q2 2025 report offers data and insights on:
- Quarterly fundraising trends
- Top industries and verticals
- Top funding destinations
- Megadeal value and volume
- List of most active investors
