Indian Startup Funding Drops 38% to $2.1 Billion in Q3 2025

India’s startup ecosystem, the third-largest in the world, witnessed a muted funding quarter between July and September 2025. According to Inc42’s “Indian Tech Startup Funding Report Q3 2025”, startups secured just $2.1 billion across 240 deals, marking a 38% year-on-year decline from $3.4 billion in the same quarter last year. Even on a sequential basis, this represented a 20% drop from $2.6 billion in Q2 2025”.

Funding Patterns Across Stages

Investor caution was evident across all stages. Late-stage funding fell the most, dropping 54% YoY to just over $1 billion across 30 deals, with PharmEasy’s $192 million debt round the only mega-ticket transaction. Other large raises included TrueMeds ($85 million Series C), Infra.Market ($83 million), and Safe Security ($70 Mn). 

Growth-stage rounds proved relatively resilient, slipping 16% YoY to $751 million across 65 deals, while seed-stage startups raised a modest $200 million across 110 deals, down 6% YoY. Despite the slowdown, investors showed confidence in early bets, particularly in AI-led startups, with around 60% of institutional investors allocating 20% of their portfolios to this segment.

Sector and City Highlights

Among sectors, e-commerce startups dominated, raising $356 million across 56 deals, supported by sizeable rounds from The Sleep Company ($55 million) and CityMall ($47 million Series D). Healthtech followed with $300 million from 13 deals, boasting a median ticket size of $23.1 million. 

Enterprise tech ($285 million) and fintech ($281 million) were close behind. In terms of hubs, Mumbai overtook Bengaluru in total funding, drawing $617 million across 37 deals, while Bengaluru retained the lead in activity with 76 deals worth $544 million.

Trends and Investor Outlook

The quarter also saw subdued M&A activity, which shrank 28% YoY and 44% sequentially, alongside zero unicorn additions, compared to three in Q3 2024. However, five startups – Netradyne, Drools, Porter, Fireflies AI and Jumbotail – have already entered the unicorn club in 2025. Meanwhile, investors announced $2.5 billion worth of new funds in Q3 alone, taking the 2025 total to $9 billion, with a strong bias towards early-stage ventures. Survey results show 51% of investors expect deal activity to rise, though 27% remain cautious amid economic and US-India trade uncertainties.

Read More: India’s External Debt Hits $747.2 Billion at June-End 2025: RBI Data!

Conclusion

The Q3 2025 funding report underlines the caution gripping India’s startup ecosystem, with funding down sharply across most stages and no new unicorns minted. Yet the resilience of e-commerce and healthtech, the rise of Mumbai as a funding hub, and strong investor appetite for early-stage AI ventures suggest that while sentiment is cautious, the ecosystem is far from stagnant. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.