VC funding into Indian startups halves YoY in May

A combination of fewer deals and a near absence of high-value transactions has resulted in a 55% decline in venture capital (VC) funding in the Indian startup ecosystem in May year-on-year. The $240 million funding raised by Rapido was the only big-ticket transaction last month.

The total funding for May 2026 came in at $651 million from 76 deals: the number is about half that of what startups raised in May 2025 at $1,450 million, per YourStory Research. In April this year, startups raised $993 million.

Lack of VC funds reveals the challenges in the ecosystem. In fact, the monthly funding of May is the second lowest for the Indian startup ecosystem since January 2025. The lowest amount was in July 2025 where the funding raised was $621 million.

The number of deals has also reduced. Additionally, May had just one transaction which was above $100 million and this was from mobility startup Rapido and there were just two deals above $50 million in value: Scapia ($63 million) and Skyroot ($60 million).

These developments do not bode well for the Indian startup ecosystem. Investors are now focusing on artificial intelligence (AI) startups and unfortunately India has few credible companies in this segment. Also, the macroeconomic environment is not conducive enough for increased inflow of capital into Indian startups.

In terms of stages that raised funding in May 2026, the early category raised the highest amount followed by the late stage. This is broadly in line with the trends that the ecosystem has been witnessing over the last two years.

The mobility segment raised the highest amount of funding for the month and this is only due to the single transaction of Rapido. This was followed by the fintech segment and spacetech.

As for cities, Bengaluru saw the most VC inflow followed by the Delhi-National Capital Region (NCR) and then Hyderabad. The emergence of Hyderabad at the third spot was a surprise, given that Mumbai is usually among the top three cities for startup funding. The big-ticket transaction in Skyroot helped Hyderabad get featured on the list.

As we approach the half-year mark, the current VC funding trends do not exactly generate confidence. There seems to be multiple headwinds the Indian startup ecosystem continues to face at the same time and there are no signs that these will go away anytime soon. The only hope is that the second half of the year will turn out to be better.