Representative illustration with the words 'Venture Capital'.
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Bengaluru: Geopolitics, tariff wars and macroeconomic factors have stolen the wind off the sail for venture capitalists looking at Indian start-ups. According to data presented by market intelligence firm, Tracxn venture capital (VC) funding in Indian startups has shrunk nearly 22 per cent this year (January to August 15) to $3.8 billion compared to $4.9 billion in the same period last year.
Experts are of the view that funding might pick up in the next few months but will still fall short of the quantum seen in 2024. In 2023, startups raised $7.4 billion and hit a record $20.5 billion in 2022.
“The current startup funding landscape in India is undergoing a period of recalibration. In the last 18–24 months, macroeconomic headwinds, global interest rate hikes, and cautious investor sentiment have slowed the pace of large-ticket funding rounds,” said Roma Priya, founder of Burgeon Law, a legal firm working in the startup space.
Tariff-related considerations and inflationary pressures have further pushed investors to prioritise sustainable growth over aggressive scaling.
“However, this shift is not necessarily negative. It has encouraged founders to focus on unit economics, profitability, and operational efficiency. Investors today are looking for businesses that can demonstrate resilience, clarity of vision, and a path to steady revenue growth, even in uncertain environments,” added Roma Priya, who advises and mentors startups, angel investors and VC/private equity funds.
Tracxn data showed that across sectors, consumer startups raised $42.5 billion between 2020 and August 12, 2025.
Last week, early growth investment fund Atomic Capital announced the final close of its maiden fund with a corpus of over Rs 400 crore, focused on early growth-stage Indian consumer, consumer-tech, and consumer-enabler startups. Sectors such as retail, fintech and food & agriculture technology raised $27.3 billion, $18 billion and $11.4 billion over the last 5.8 years.
“Early-stage funding remains relatively active, with seed and pre-Series A investments seeing healthy traction, particularly for innovative solutions that address real market gaps. Sectors such as climate tech, agritech, EV and clean mobility, healthtech, and SaaS for global markets are emerging as promising areas. These sectors benefit from strong policy push, rising consumer demand, and long-term scalability, making them attractive for both domestic and international investors,” said the founder of Burgeon Law.
On the global VC funding front, Somdutta Singh, Serial Entrepreneur, Founder and CEO Assiduus Global said globally, VC funding in H1 2025 hit $205 billion, up 32% y-o-y, even though Q2 at $91 billion cooled from Q1’s $114 billion. “About $40 billion in Q2 went to AI, roughly 45% of all venture dollars, and Q1 alone saw $66.6 billion in AI. By late July, AI funding had already surpassed all of 2024. Healthcare is holding its ground with $14.8 billion in Q2, while financial services pulled $10.8 billion, showing investors still like durable, regulated categories with clear monetisation,” she said, adding India mirrors the tilt when it comes to AI funding.
GenAI ecosystem now comprises over 890 startups, growing 3.7x in the past year, with application focused ventures making up more than 83% of the landscape, according to Nasscom data.
Another sector which is also seeing growth is gifting startups. All-time funding in India stands at $159.4 million. While global gifting startups raised $1.73 billion between 2015 and 2025 (till August first week), and $66.2 million in 2025, in India, the sector recorded its highest funding activity in 2022 as it secured $63.9 million.
Neha Singh, co-founder, Tracxn, said, “The gifting and rewards sector has quietly evolved into a globally relevant, innovation-led category. Over the last decade, we’ve seen over $2.5 billion flow into gifting startups, not just to scale transactions, but to reimagine consumer experience, convenience, and loyalty. India, while still maturing, has built a strong base of resilient, founder-led businesses that are defining new benchmarks in digital-first branding and operational efficiency.”
Experts said in this climate, founders should be pragmatic, focusing on
building lean, adaptable business models, diversifying funding sources, and aligning their growth plans with evolving market realities.