Recovery beckons: unpacking India’s VC market

July 2025  |  FEATURE | PRIVATE EQUITY

Financier Worldwide Magazine

July 2025 Issue

Amid ongoing global economic uncertainty, India’s venture capital (VC) landscape has shown remarkable resilience and a strong recovery. In 2024, VC funding in India rebounded to approximately $14bn, representing a 40 percent year-on-year (YOY) increase, according to Bain & Company. This resurgence was underpinned by robust domestic economic fundamentals, progressive regulatory reforms and heightened public market activity. These factors have collectively reinforced India’s position as the second-largest VC destination in the Asia-Pacific region, even as global funding levels remained largely stagnant.

The rebound in India’s VC market was particularly notable given the broader global slowdown. Deal value in India recovered from a near five-year low in 2023, although the number of funding rounds tapered slightly toward the end of the year. According to PitchBook, $15.6bn was invested across 1570 VC rounds in 2024, marking a 23.8 percent increase in deal value YOY, while the number of deals declined marginally by 1.6 percent. This trend reflects a global shift toward prioritising quality over quantity in VC investments, with investors becoming more selective and focusing on high-potential ventures.

The momentum carried into early 2025, with India’s VC ecosystem outperforming global trends. Data from GlobalData indicates that during January and February 2025, India recorded a 40 percent YOY increase in funding value and an 11 percent rise in deal volume. The surge underscores growing investor confidence in India’s dynamic, innovation-driven start-up environment. In contrast, global VC deal volume declined by nearly 9 percent during the same period, making India’s performance all the more impressive. The country’s 40 percent growth in funding value also significantly outpaced the global average of approximately 17 percent, further cementing its status as a standout market in an otherwise subdued global VC landscape.

Sectoral strengths and emerging trends

The growth in India’s VC activity in 2024 was largely driven by a sharp rise in deal volumes. Bain reports that the number of VC deals increased from 880 in 2023 to 1270 in 2024 – an approximate 45 percent rise. Small- and medium-sized transactions, defined as deals under $50m, accounted for around 95 percent of the total, representing a 1.4 times increase compared to the previous year. Larger deals exceeding $50m nearly doubled, returning to pre-pandemic levels as high-quality start-ups such as Zepto, Meesho and Lenskart attracted significant capital. Interestingly, while the number of megadeals (those exceeding $100m) remained stable, their average size declined by 20 percent, reflecting a broader trend toward more conservative valuations. Despite this, five new unicorns emerged in 2024, compared to just two in 2023.

Sector-wise, technology-led industries dominated the VC landscape. Consumer tech, software and software as a service, and FinTech collectively accounted for over 60 percent of total funding. Consumer tech emerged as the leading sector, with funding increasing 2.3 times to reach $5.4bn. This growth was driven by significant investments in business to consumer commerce, travel tech, gaming and EdTech. These sectors benefitted from strong consumer demand and digital adoption, which were further accelerated by pandemic-era behavioural shifts.

Traditional sectors such as banking, financial services and insurance, and consumer/retail also experienced notable funding growth. These industries attracted capital due to their large addressable markets, untapped demand and favourable socioeconomic trends. As a result, India has maintained its position among the top five global markets for VC funding. The simultaneous increase in both deal volume and value highlights the country’s growing importance in the global start-up ecosystem.

The positive momentum observed in 2024 extended into the first half of 2025. According to EY’s Private Equity and Venture Capital Trendbook, although there was a 9 percent decline in investment activity in January 2025 compared to the same month in 2024, the uptick from December 2024 suggests a promising outlook for the remainder of the year. This optimism is supported by India’s stable macroeconomic environment, consistent government policies and a correction in public markets, all of which is expected to enhance both private equity and VC deal activity moving forward.

GlobalData’s analysis further reveals that India accounted for approximately 9 percent of all VC deals announced globally during January and February 2025, and more than 4 percent of global deal value. Exit activity also remained robust in 2024, with total exit value reaching $6.8bn. Notably, public market exits increased significantly, rising from 55 percent to 76 percent of total exit value between 2023 and 2024. This shift was driven by a sevenfold increase in IPO exit value, fuelled by improved liquidity, a recovery in tech stock valuations, regulatory reforms and a backlog of delayed IPOs finally coming to market.

Looking ahead to the second half of 2025 and beyond, the outlook for India’s VC market remains optimistic. Investor sentiment is buoyant, and capital availability remains strong, suggesting continued robust deal activity. Growth-stage investments are expected to rise, particularly in emerging sectors such as semiconductors, energy transition and deep tech. These industries are likely to attract increasing interest in the coming years, helping to sustain and evolve India’s VC ecosystem.

Overall, India’s VC market has not only rebounded but is now thriving, outperforming global peers and demonstrating its potential as a leading hub for innovation and investment. With strong macroeconomic fundamentals, a vibrant start-up culture and increasing global investor interest, India is well-positioned to continue its upward trajectory in the global VC arena.

© Financier Worldwide

BY

Richard Summerfield