Even as public markets fired up the imagination of the startup listings in 2025, little has changed in the overall funds allocated to these fledgling companies. Come 2026, most experts believe that with global funds becoming tighter, currency volatility, trade and tariff shocks etc and more will keep startups in want of funds —- keeping the funding winter situation unchanged in the foreseeable future.
After an uptick seen in 2024, the funding situation reversed in 2025, and at $11.1 billion raised as per Tracxn data, the funding situation is back to where it was in 2020, at $11.5 billion.
“India's tech startup funding winter is yet to fully ease and is likely to remain prolonged. After the pandemic-driven surge, funding levels have largely reverted to pre-pandemic ranges, with no sustained recovery visible so far. While 2024 saw a modest uptick, total capital deployed during the year was still less than half of what the ecosystem witnessed at its peak in 2021 and 2022,” says Neha Singh, co-founder of Tracxn.
While few experts expect funding to return to the peaks of 2021 and 2022, the number of funding rounds have also shrunk in 2025, compared the year before as well as pandemic year — indicating that the funding picture is slipping into a deeper slowdown.
In 2026 too, most experts believe that startup funding to remain subdued due to two reasons — extreme geopolitical uncertainty. Added to that, most startups too are busy pivoting to AI-led strategies making investors wait and watch for newer models to emerge.
Post-Pandemic Startup Funding
Funding Year | Total Funding | No. Of Rounds | Change From Previous Year |
2025 | $11.1 billion | 1,649 | -12.6% |
2024 | $12.7 billion | 2,531 | 13.4% |
2023 | $11.2 billion | 2,658 | -55% |
2022 | $25 billion | 3,590 | -35.7% |
2021 | $38.9 billion | 3,582 | 238% |
2020 | $11.5 billion | 2,517 | NA |
Source: Tracxn
Is Fintech Funding Winter Over?
The exit picture for fintechs brightened exponentially in the last two years – with 12 IPOs in 2024 and 2025. This has changed the fortunes of fintechs in general, making the sector attractive for more funds. A few even believe that the fintech funding winter might be over.
Akshay Mehrotra, MD & group CEO, Fibe says that investor confidence in the fintech sector has strengthened steadily over the years. Its outcome says that investors are backing businesses that demonstrate proven models, consistent traction, and strong governance.
“Importantly, investor sentiment has returned with a clearly positive mindset toward fintech, translating into stronger conviction and sustained capital support. This renewed confidence has enabled fintech companies to scale efforts more decisively across compliance driven product innovation, technology, and long-term growth. The sector has now moved into a more confident, constructive, and growth-oriented funding phase." Mehrotra adds.
Tracxn data indicates that the needle has moved little in the last one year – the fintech sector raised $2.4 billion in 2025, representing a 2% increase from the $2.3 billion in 2024. Yet, it remains the third most funded fintech market in the world, next only to the US and the UK. And the future looks brighter too.
“There used to be a lot of regulatory ambiguity in fintech, but that's largely cleared up now, and confidence to build has increased,” says Aditya Vuchi, general partner at VCMint.
Moreover, non-public market exits have also been vibrant as fintechs saw 22 acquisitions in 2025, and 32 in 2024. The sector also minted six unicorns since 2023, an event that has turned rarer in the startup ecosystem in general.
There are other sectors that investors seem to be optimistic about. “Beyond fintech, there's strong investor interest in spacetech and its ancillary industries. Drones are another exciting area, both for civilian applications and defense,” adds Vuchi, who is evaluating opportunities in these segments.
He adds that India now has many super angels and startup founders who've had meaningful exits, as the ecosystem is now 13 years old; and they prefer to back promising companies early on.
Funding Cycles Get Longer
While most problem-solving sectors are seeing keen interest from VCs as well as limited partners who are willing to back them, most startups have inherent issues before raising a fresh round of funding. While early stage funding has been buoyant in 2025, and seed stage funding is flat at best, and late stage deals fell sharply during the year. Most experts indicate that few startups are able to progress from Series A to B – creating a funding gap.
“The visibility of the deeptech sector is higher than earlier but the path to profitability in this sector has to evolve quickly. The revenue cycle historically takes longer but with significant support from the government on land and capex the scenario is improving. However visibility for Series B+ has been relatively lower when compared to the activity in this space at Seed to Series A," explains Manu Iyer, co-founder and general partner at Bluehill.VC which invests in the sector.
Most other sectors also face similar problems. “Investors are adopting a more rigorous approach, placing greater emphasis on scalability, profitability, and a company's ability to withstand external shocks before committing capital,” comments Singh.
Added to that, the rapid rise in valuations is also dampening the spirits of investors who are looking for value. “The cycle of exits in deep tech is just taking off with the likes of Ather and Tonbo. This will give confidence to later stage investors to participate. We have large institutions like banks, insurance companies and more which have long drawn investment cycles. Right now, there are many restrictions, but if Canada Pension Fund can invest, why can't our institutions,” questions Parthasarathi Sridhar, co-founder and general partner at Bluehill.VC.
Funding Year | Seed Stage Funding (USD) | Early Stage Funding (USD) | Late Stage Funding (USD) | ||
2020 | $1.3B | $2.5B | $7.6B | ||
2021 | $2.0B | $7.5B | $29.2B | ||
2022 | $2.2B | $6.7B | $15.4B | ||
2023 | $1.4B | $3.6B | $5.6B | ||
2024 | $1.5B | $3.7B | $7.0B | ||
2025 | $1.2B | $4.2B | $5.4B |
Source: Tracxn
Where Are Domestic Funds?
Yet another reason why early and seed stage investments are doing better than the late stage's ‘big cheques' is the geographical origin of funds. Seed and early stage investments are driven by funds raised via alternate investment funds (AIFs), family offices, angel investors and more who are domestic in nature. Foreign funds however are slower to come.
“We have many super angels or startup founders in the Indian ecosystem who have made large cheques from exits as the ecosystem is now 13 years old. They prefer to enter earlier on into promising companies,” says Vuchi.
Added to the liquidity crisis internationally, foreign funds are also facing difficulties investing in Indian startups. For example, foreign funds which are domiciled in India have to file tax returns, and complete a large chunk of paperwork.
For example, foreign institutions which are not domiciled in India still have to file tax returns locally here. Hence, they prefer to invest via feeder structures in Singapore, explains Iyer, adding that it's also much more expensive to route money. “In most cases, the entity that's receiving the money has to bear the expenses,” he adds.
A few experts also believe that Indian equity markets have seen extensive participation of domestic investors. Similarly, they expect the governments to pave way for more domestic institutions to participate in the startup funding ecosystem as well.
“We have large institutions like banks, insurance companies and more which have long drawn investment cycles. Right now, there are many restrictions, but if Canada Pension Fund can invest, why can't our institutions,” questions Sridhar.
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