Indian startup funding slows as global investors pull back and shift capital to the US

what happened

Venture funding for Indian startups is going through a correction, with late-stage and angel rounds dropping sharply. Global investors have become more picky and are steering money toward other countries and industries. A weaker rupee and tougher competition from America have made raising money harder for startups and VC funds, according to a Moody's report.

Tracxn figures show late-stage volume reached a high of $29.7 billion in 2021, slid to $6.1 billion in 2025 and stood at $5.7 billion by October 26, 2026. The number of deals also shrank, from 277 in 2021 to 98 so far this year. Angel investing dropped from $542 million in 2020 to $95.4 million in 2025, with rounds falling from 577 to 286.

Some former heavyweights have pulled back. Tiger Global made 55 Indian investments in 2021 but just one in 2026 so far, while SoftBank, per Venture Intelligence, made two after largely sitting out since 2022. New SEBI rules for angel funds, including an accredited-investor requirement, add further uncertainty.

why it matters

For markets, this points to a reset of valuations, with investors now weighing profitability and unit economics rather than the lofty multiples of the zero-rate era. Indian VC managers and the late-stage segment are most exposed, while capital keeps moving toward AI and US tech.

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