Indian startups raised over $700M in January as VC funding plateaus
The momentum of capital inflow into Indian startups remained tepid in January 2025 due to challenging macroeconomic conditions.
The year 2025 has not begun on a very optimistic note for the Indian startup ecosystem as the monthly venture capital (VC) funding into startups in January saw a 1.5% year-on-year dip, largely due to the absence of momentum in the capital inflow.
The total VC funding in January 2025 stood at $712 million compared with $723 million a year ago. However, the decline was 35% compared to December 2024 when the total funding stood at $1.1 billion.
The month of January was very tumultuous due to both domestic and international factors. US President Donald Trump has instilled a trade imbalance with the threat of tariffs creating uncertainty in economies. On the domestic front, there is a perceptible slowdown in the economy.
These elements had a bearing on the Indian startup ecosystem and investors remain cautious about opening their purses. This was evident in January when there was just a single deal with a value of above $100 million when Infra.Market raised $122 million.
The first week of January saw just $14.4 million of VC inflow, one of the lowest over the last two years.
There were very few large deals with India-headquartered companies but overseas-based companies did well, with Innovaccer raising $275 million and Netradyne raising $90 million.
Now it remains to be seen whether there will be any change in the VC inflow in the coming months, however, the initial signs show that there will not be any sharp increase. It could be the case of a steady revival.
Amidst this not-so-positive environment, the silver lining has come in the form of the Union Budget 2025 as it delivered two uplifting news. One was the addition of another Rs 10,000 crore for the fund and fund scheme for the startup ecosystem. Secondly, FM Nirmala Sitharaman announced lower tax incidence for venture capitalists who operate under the model of alternative investment funds.
These developments give a boost to the startup ecosystem and signal that the government will continue to support this segment.
In the stage-wise funding for January, the early-stage category continued to show the highest traction in terms of funding as well as the number of deals. The late-stage category came in second with just two deals. This trend is likely to play out for the rest of the year when the early stage will have a lot of deal activity but the quantum of money will be lower.
The fintech segment continued to remain the top funded category in January, followed by marketplaces, and in third place came the electric vehicle segment. The fintech segment continues to remain the most attractive for investors.
In terms of cities, Mumbai emerged as the leading destination for startup funding followed by Bengaluru and Delhi-NCR. These three cities have consistently remained in the top three positions.
Edited by Kanishk Singh