Will Investors Open Their Wallets Again In 2026? |
By the end of 2025, India’s tech startup ecosystem was operating in a far tighter capital environment. Total funding closed at $11 Bn, well below mid-year projections of $14-15 Bn.
This played out despite a broadly supportive domestic backdrop. Global uncertainties, driven by geopolitical tensions, tariff concerns and an unclear interest-rate trajectory, however, continued to shape the investor behaviour. As a result, capital was deployed into fewer, stronger companies, with longer diligence cycles and tighter underwriting standards.
At the same time, 2025 marked a shift from a prolonged slowdown to a more balanced, cautious rebound. Investments and exits began to move in tandem, offering investors clearer capital-return visibility.
“That is what a rebuilding year usually looks like in private markets,” said Chandrasekar V, partner (research) at TVS Capital.
For instance, after a muted start, IPO activity accelerated in the second half, with 16 new-age tech companies listing on Indian exchanges. This improvement in exit outcomes helped restore limited partner (LP) confidence, which was reflected in strong fundraising by domestic VC and PE firms.
Further, according to the Inc42 data, new funds launched in 2025 collectively raised over $12.1 Bn, a 39% year-on-year (YoY) increase, with growing interest in deeptech and healthcare-focussed strategies.
“Deployment has been cautious and will rightfully continue to remain so as funds seek out differentiated ideas that have the potential to grow profitably. The one area where friction exists between VCs and LPs is in the pace of DPI (distributed to paid-in capital) generation. I hope funds will use the liquidity provided by the strong wave of IPOs that is happening now to exit positions and recycle cash,” said Deepak Padaki, president at Catamaran Ventures.
Going forward in 2026, rather than a dramatic snap-back, analysts project a selective but positive rebound for new-age tech startup funding.
For high-conviction stories – especially AI-led platforms, core fintech and real-economy infrastructure, or truly category-defining consumer and B2B brands – the ecosystem is already seeing willingness to write larger cheques.
Together, these shifts set the context for 2026 – one where capital is available, but only for startups that can combine conviction, differentiation and a clear path to profitable scale. Meanwhile, here’s everything else that 2026 is expected to see…
Capital May Return, But Pace Will Differ
In 2025, early stage activity remained resilient, with company formation continuing across AI, climate, healthcare, manufacturing and new-format consumer themes. Seed and Series A investors, including corporates and micro-VCs, stayed active and analysts expect this momentum to carry well into 2026.
The clearest........