Funding Trends: A Mixed Bag for Indian Startups

"Over the years, I have worked closely with founders who are building incredible businesses, yet many continue to face the same challenges—limited access to funding, mentorship, infrastructure, and global market opportunities. These roadblocks don’t just slow down innovation; they often determine how far a startup can go."

These words from Archana Jahagirdhar, Founder and Managing Partner at Rukam Capital, capture the essence of startup funding. While funding is a lifeline, startups cannot forever rely on external capital for survival or growth. Profitability remains the ultimate goal.

Funding Volatility: A Surge in Yearly Growth, Yet a Weekly Decline

Jahagirdhar’s words underscore a crucial truth: while funding is vital, sustainable profitability is the ultimate measure of success.

This week, the Indian startup ecosystem witnessed deals amounting to $158.5 million, marking a 76.9% increase from the same period last year. However, this also represents a 51.6% decline compared to last week's total of $327.3 million, as per Tracxn data. Despite an improvement from the previous year, venture capitalists (VCs) appeared hesitant in the third week of February 2025, resulting in a drop in total VC funding to $147 million across 22 deals, compared to $323 million last week.

The absence of large deals continues to pose a challenge for the Indian startup ecosystem. Many investors are exercising caution due to global economic uncertainty, inflationary pressures, and a more risk-averse approach to late-stage funding. This shift suggests that while early-stage startups are still attracting capital, the real test lies in scaling and securing follow-on investments.

The Fundraising Illusion: A Founder’s Perspective

Pushkar Singh, a notable voice in funding and entrepreneurship, highlighted a crucial misconception about fundraising:

“I know scores of founders who mistakenly believe continuous fundraising at high valuations equals success. The media glorifies founders who raise huge rounds at massive valuations. We often forget that raising venture capital is one way to build a company. It’s never the end goal.”

He recounted a story of a junior from Manipal who once dreamed of working for Goldman Sachs but instead built a successful IT services business. With just 20 customers, his business is on track for $1 million in annual revenue with a 60% net margin—all without VC funding. His story highlights the importance of financial independence over chasing valuations. Many venture-backed founders, despite their ambitions of financial independence, end up continuously chasing the next round of funding, often losing sight of building a sustainable business.

Key Deals of the Week

1. Udaan: Business-to-business (B2B) ecommerce firm Udaan secured $75 million in fresh funding from UK-based M&G Prudential and Lightspeed Venture Partners.
2. Waterfield Advisors: Wealth advisory firm Waterfield Advisors raised $18 million in a funding round led by Jungle Ventures.
3. Spyne: Automotive-focused visual technology startup Spyne secured $16 million in a Series A funding round led by Vertex Ventures, with participation from Accel, Storm Ventures, and Alteria Capital.
4. Singulr AI: AI governance and security startup Singulr AI raised $10 million in a seed funding round led by Nexus Venture Partners and Dell Technologies Capital.

The Takeaways for Entrepreneurs

• VC Funding Isn’t Everything: Founders must focus on profitability and cash flow rather than constantly chasing valuation.
• Market Uncertainty Affects Funding: The broader economic environment still lacks clarity, leading to cautious VC activity.
• Late-Stage Funding Remains Weak: While early-stage startups are seeing deal flow, late-stage activity remains slow due to investor caution and macroeconomic concerns.
• IPO Watch: PhonePe: The biggest development this week is PhonePe’s IPO announcement, which could significantly impact India's startup ecosystem by setting a benchmark for other late-stage startups considering public listings.

Sustaining Growth Amidst Challenges

As VCs remain selective, Indian startups must demonstrate resilience. Early-stage activity offers a glimmer of hope, but the ecosystem’s true strength will be tested when late-stage deals rebound. Founders must prioritize sustainable growth, innovation, and financial discipline.

The announcement of PhonePe’s IPO is a significant moment for India's startup ecosystem. If successful, it could instill confidence in both investors and startups, paving the way for more late-stage companies to go public rather than relying on private capital. This shift could reshape the funding landscape, providing new opportunities for startups looking to scale.

In this volatile environment, adaptability is paramount. Success will favor those who balance funding with operational efficiency and strong business fundamentals. The core message remains clear: securing funding is just a milestone—building a profitable, self-sustaining business is the real victory.