India’s startup funding market is stabilising, but investors are becoming far more selective, increasingly favouring repeat founders, larger deals, and startups with stronger financial discipline, according to Tracxn Co-Founder and CEO Neha Singh.
While overall deal activity has slowed from the highs seen in 2021, Singh said the nature of funding itself has changed sharply over the past few years.
“Deal volumes have decreased,” Singh said, adding that although the number of transactions has fallen, “the median deal size has actually increased”.
She said investors are continuing to deploy capital, but are backing a smaller pool of companies with stronger founder profiles and a greater focus on profitability and unit economics.
“There are a lot more seasoned founders now than what there were in the ecosystem 10 years back,” she said, referring to repeat entrepreneurs and senior executives leaving large companies to build startups. “I think that is also encouraging the higher ticket size of investments.”
The shift marks a clear departure from the aggressive funding environment of 2021, when startups were often rewarded for rapid expansion rather than profitability.
“2021 was obviously growth at all costs,” Singh said. “It was more about growth, not so much about profitability.”
That model has become harder to sustain as foreign late-stage investors, including global funds that earlier led many late-stage rounds in India, have slowed their activity.
“The perpetual capital which you always had… obviously that is not there,” Singh said.
Instead, companies are increasingly being pushed towards stronger financial discipline as public markets become a more realistic path for growth-stage startups.
“IPO has become a very good option for a lot of late-stage companies,” she said, adding that public market investors place “higher expectations on economics and profitability”.
Singh said the rise in venture-backed listings over the last few years has changed how founders think about building companies.
“When we got listed three years back, we were the first venture-funded company from Bangalore to get listed,” she said. “After Zomato listed, probably that was when a lot of companies realised that this is a very good option.”
She noted that 2025 saw an “all-time high” in venture-backed technology listings in India, with nearly 20 VC-backed companies going public.
The funding shift is also being shaped by changes in where the money is coming from.
According to Singh, domestic pools of capital, including family offices and Indian investors, have become significantly larger over the past decade.
“The domestic pools have become fairly large,” she said, adding that many venture funds now have a growing share of domestic limited partners.
At the same time, some Indian venture capital firms are increasingly looking towards the United States to participate in the artificial intelligence boom.
“Everyone wants to tap into the AI wave that is going on,” Singh said, pointing to Indian firms opening offices abroad and investing in US-based AI companies.