Why Indian Founders Still Seek US Funding Despite $86B in Local Capital

India today has one of the most dynamic startup ecosystems in the world. The country’s private equity and venture capital (PE/VC) industry is sitting on over $86 billion in dry powder, with more than 1,000 Alternative Investment Funds (AIFs) registered and thousands of professionals scouting for deals. On paper, this should be the golden age for Indian entrepreneurs.

Yet, the reality on the ground tells a different story. Despite the capital abundance, many of India’s brightest AI and DeepTech founders are still boarding flights to the United States in search of validation and funding. Consider the data: India has around 6,000 AI startups, while the US boasts nearly 67,000. Why does such a large proportion of India’s innovation ecosystem continue to look westward?

The answer lies in the peculiar, and sometimes counterproductive, logic that pervades parts of India’s venture capital industry.

The Ironies of Indian VC: From Gatekeeping to Missed Opportunities

Over the years, I’ve observed certain patterns that repeatedly frustrate founders. While not every VC operates this way, these behaviors are common enough to create systemic barriers.

• “Warm intros only” – Venture capital is supposed to be about discovery. Relying solely on closed networks restricts access and leaves many talented founders outside the circle.
• “We don’t lead rounds” – Too often, funds wait for others to take the first leap. This herd mentality stifles conviction-driven investing.
• Ghosting founders – Disappearing after a meeting without so much as a follow-up email is unprofessional. Respecting a founder’s time should be a baseline, not a luxury.
• No feedback culture – It takes two minutes to provide constructive feedback. For a founder, that guidance can save months of missteps. The goodwill generated is invaluable.
• “We want returns in 3–5 years” – DeepTech and frontier innovation rarely yield quick returns. Expecting short-term results from long-term bets guarantees missed opportunities.
• IIT/IIM bias – While elite institutions produce great talent, innovation comes from diverse backgrounds. Dismissing non-traditional founders is a blind spot.
• “Explain in 30 seconds” – Groundbreaking ideas cannot always be compressed into an elevator pitch. Investors must be willing to listen beyond the surface.
• “Has this been done in the US?” – If yes, founders are accused of copying. If no, investors doubt feasibility. This catch-22 logic kills originality before it has a chance to grow.

Not All VCs Are the Same

It’s important to acknowledge that India has many exceptional venture capitalists. These are the investors writing first checks, backing unorthodox founders, and playing an active role in building companies that can scale globally. They are proof that courage and conviction exist in the ecosystem. However, the outdated practices listed above remain widespread and continue to push ambitious founders abroad.

What Needs to Change

The Indian startup ecosystemcannot thrive if founders see VCs merely as obstacles to overcome. Founders are customers of capital. They deserve respect, empathy, and collaboration.

To unlock India’s true innovation potential, VCs must:

• Be human – Treat founders as partners, not transactions.
• Be curious – Ask questions with genuine interest instead of defaulting to skepticism.
• Be bold – Take the first step. Write the first check. Back ideas when they’re raw.

If India wants to keep its best and brightest from seeking capital in Silicon Valley, its venture industry must evolve from risk-averse gatekeeping to conviction-led partnership.

From Capital to Conviction: Rethinking India’s Venture Ecosystem

The quirks of India’s venture capital ecosystem are more than just amusing anecdotes—they represent real roadblocks for founders and missed opportunities for investors. If India wants to lead in AI, DeepTech, and frontier innovation, its venture capital industry must evolve beyond conventional biases and short-term thinking.

India already has the ingredients: capital, talent, and market scale. What’s missing is conviction. Venture capitalists need to shift from gatekeeping to genuine partnership—listening with curiosity, engaging with empathy, and taking bold first bets instead of waiting for external validation.

By fostering this mindset, India can ensure that its best founders build transformative companies here, not abroad. The next decade will belong to ecosystems that don’t just have money, but also the courage to back bold ideas and the patience to nurture them into global success stories.

About the Author:
Apoorv Sharma is the Co-Founder of Excluto, a wealth-tech platform that connects Limited Partners (LPs) with Venture Capital (VC) firms raising their next fund. With years of experience in the startup and investment ecosystem, he is passionate about helping investors discover opportunities and empowering founders to access the right capital.