India Startup Funding Hits 2025 Low: July VC Inflow Drops 42% YoY

TICE Startup Funding Index | August 2, 2025

In a week where caution outpaced confidence, India’s startup funding landscape continued its downward slide. Between July 28 and August 2, startups across the country raised $130.49 million through 21 deals, according to Entrackr. Inc42 offered a more conservative tally of $103.7 million across 14 deals, underscoring the fragmented nature of private market data tracking. Regardless of the source, one trend remains unmistakable: funding is shrinking—both in volume and value.

This week’s haul marks a steep decline from the previous week, when 23 startups secured $202.79 million. The drop, calculated at nearly 36%, reflects a visible shift in investor appetite. Mega deals have all but vanished, replaced by smaller, earlier-stage bets that signal a recalibration of venture capital strategy.

Enterprise Tech Defies the Downturn

While most sectors felt the chill, enterprise tech and AI startups defied the trend. Safe Security, a cybersecurity scale-up, clinched the largest cheque of the week—$70 million in Series C funding. The round, led by Avataar Ventures with participation from Susquehanna Asia Venture Capital and NextEquity Partners, reinforces investor focus on digital security amid rising global cyber threats. Safe Security’s total funding now exceeds $170 million, and its CyberAGI platform is positioning itself as a global leader in autonomous cybersecurity intelligence.

Sharpsell.ai, another enterprise tech player, raised ₹30 crore (approximately $3.4 million) in Series A funding led by Equentis Angel Fund. The startup plans to expand its AI-driven sales enablement platform into Southeast Asia and the MENA region, signaling investor confidence in scalable B2B solutions.

AI Startups Attract Capital—In Smaller Doses

Artificial intelligence startups continued to draw interest, though ticket sizes remained modest. Metaforms raised $9 million in Series A funding led by Peak XV Partners. The startup automates market research workflows and serves top global agencies. Drizz secured ₹23 crore (around $2.7 million) in seed funding from Stellaris Venture Partners to scale its mobile app testing automation platform. Vihaan ai participated in an undisclosed round and acquired L.earn, a digital learning platform, further expanding its capabilities.

Together, these AI deals totaled approximately $11.7 million, reflecting sustained interest in the sector despite tighter capital flows.

Funding Breakdown: Growth Shrinks, Early-Stage Leads Volume

Growth vs. Early-Stage: A Tale of Two Strategies

Growth-stage deals accounted for $90.88 million, largely driven by Safe Security’s round. In contrast, early-stage startups dominated in volume, with 15 deals and three undisclosed rounds. This distribution highlights a growing investor preference for early bets with high upside potential, especially as growth-stage valuations remain under pressure.

The capital allocation mirrors a broader July trend: cautious deployment, particularly at the growth stage, where liquidity constraints and valuation resets have made investors wary.

July 2025: A Month to Forget for VC Funding

Zooming out, July 2025 stands as the worst month of the year for Indian startup funding. Total VC inflow reached just $621 million, marking a 42% year-on-year drop and a 41% slide from June. Entrackr’s figures suggest an even lower total of $598 million across 105 deals, highlighting discrepancies in tracking methodologies.

Notably, no single deal in July crossed the $50 million threshold—a rarity in a market that regularly sees $100 million-plus rounds during more optimistic cycles. Weekly averages hovered around $100 million, well below the $150–$200 million norm seen earlier in the year.

Investor Sentiment: Selective, Skeptical, and Stage-Sensitive

The subdued numbers reflect a broader shift in investor sentiment. Venture capitalists are increasingly selective, backing either early-stage disruptors or late-stage proven winners. Growth-stage startups, which typically require larger capital infusions for scaling, appear caught in the crossfire of valuation resets and tight liquidity.

Industry insiders point to rising global interest rates, geopolitical uncertainty, and domestic regulatory shifts as key factors behind the retreat in VC activity.

What’s Next: Waiting for the Rainmaker Deals

Analysts expect the funding drought to persist unless a major exit event or unicorn round revives investor optimism. Until then, founders may need to tighten budgets, prioritize capital efficiency, and delay large-scale expansions.

Still, sectors like AI, cybersecurity, and enterprise SaaS continue to attract capital, suggesting that the next funding upswing may emerge from niche players solving critical global problems—not flashy consumer plays.

As India’s startup ecosystem adapts to leaner funding cycles, the coming months will test founder resilience and investor conviction. The big question remains: Will August bring a rebound—or deepen the chill?