After a prolonged funding winter, VCs both global and domestic firms are launching new funds, buoyed by India’s thriving start-up IPO pipeline and a recovering funding landscape.
Early-stage VC firm Accel raised $650 million for its eighth India-focused fund, while Silicon Valley-based Bessemer Venture Partners launched its second India-focused fund with a corpus of $350 million.
Domestic firms such as Cornerstone VC and Prime Venture Partners have also raised large funds, at $200 million and $100 million respectively. Meanwhile, others like Eximius Ventures and SamVed VC have closed smaller funds of $30-50 million since the start of this year.
“Maturity of Indian markets from a consumption economy perspective and public markets perspective is leading to significant opportunities for investors to back in India,” said Abhishek Prasad, Managing Partner at Cornerstone Ventures.
Investors have noticed an uptick in fundraising activities driven by stabilising macroeconomic conditions and renewed confidence in scalable start-ups.
“More firms will enter fundraising mode, influenced by market liquidity, regulatory clarity, and LP sentiment,” said Jinesh Shah, Managing Partner, Omnivore.
VC fundraising in 2024 dropped to its lowest level since 2019, to $2.7 billion in 2024, largely due to abundant dry powder reserves limiting fresh capital deployment, according to a recent report by Bain & Company and the Indian Venture and Alternate Capital Association (IVCA). In contrast, VCs raised $4 billion in 2023 and a record $8 billion in 2022.
Renewed VC interest, cheque sizes
There is plenty of room for the venture capital industry to find scale as compared to mature markets such as the USA, noted industry experts.
“There is a long way to go for India in terms of market growth and maturity and therefore significant room for growth of the industry. Therefore, we expect to see several new players emerge to tap these opportunities,” noted Prasad of Cornerstone Ventures.
India’s strong pipeline of startup IPOs and the growing quantum of late-stage and pre-IPO secondary funding rounds have also spurred investors to launch funds specifically focused on secondary transactions.
“An emerging trend of secondary funds being set up may also be seen. Pre-IPO funds, investing in unique start-ups hitting scale and being ready for listing are also being spoken about. These factors will in turn give better capital in the hands of investors to be ploughed back into the primary market,” said Vipul Patel, Partner, Seed Investing, IIMA Ventures.
The cheque sizes cut by investors are expected to go up, amid an improving start-up funding environment.
“Companies need more capital to be competitive even in an early growth phase and with more and more capital chasing good opportunities, higher cheques are bound to happen. There is a shift towards going in early by larger funds, to get in early into interesting investment opportunities,” said Prasad.
Larger follow-on rounds
Ticket sizes are shifting, with larger follow-on rounds for resilient start-ups, noted investors.
“Investors are going up in the stage chain and entering the seed, pre-seed stage to capture value early on in the start-ups given the increased risk appetite and premium pricing around the Series B+ rounds,” added Patel.
High-growth sectors such as manufacturing, AI and SaaS, consumer businesses will attract capital.
“Another sector that deserves more attention is AI for decision-making. The question remains whether investment will flow toward entirely new tools or vertical-specific applications of existing technologies, like small proprietary models designed for operations-intensive companies,” said Arjun Malhotra, General Partner, Good Capital.
With investor confidence rebounding, larger cheque sizes, and emerging secondary funds, India’s VC landscape is set for renewed momentum, driving capital into high-growth sectors.
