Indian Startup Funding Sees Shift Towards Small and Mid-Sized Deals

With large deals becoming increasingly rare, Indian startup funding is now dominated by small and mid-sized investments. The trend is driven by cautious global investors and a rising pool of domestic backers who are focusing on stable, profit-generating businesses.

Zeta and ToneTag Secure Fresh Investments

On Tuesday, fintech unicorn Zeta announced a $50 million funding round led by American healthcare firm Optum, pushing its valuation to $2 billion, a significant jump from its previous $1.2 billion. Meanwhile, Bengaluru-based ToneTag, which specializes in payment solutions, raised $78 million through a mix of primary and secondary capital.

Deals in the $20-30 Million Range Gain Momentum

While larger deals remain scarce, $20-30 million funding rounds have gained traction. The increasing involvement of domestic investors, who are co-investing in funding rounds, has been a key driver of this shift. However, the overall investment pace remains muted.

“Capital is chasing stable businesses that can generate profits,” said Bhavin Turakhia, co-founder and global CEO at Zeta.

Global Venture Giants Are Cautious

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According to Tracxn, the number of funding rounds has dropped significantly—126 deals so far compared to 200+ in early 2024. Total investment figures stand under $600 million, a sharp decline from $925 million during the same period last year.

Experts believe the early-to-mid-stage funding range of $20-30 million will continue to dominate, while $50-100 million deals will slow down. However, select industries, including quick commerce and AI, are experiencing a hype cycle and attracting larger investments.

SoftBank and Tiger Global Adopt a Conservative Approach

Major global investors such as SoftBank and Tiger Global have pulled back on making large India bets in recent years. Instead, they are primarily participating in follow-on investments within their existing portfolios.

SoftBank has been issuing smaller cheques in the $25-60 million range, while Tiger Global recently backed Infra.Market in a $121-million pre-IPO funding round. Industry analysts attribute the slowdown in large deals to shifting investor priorities and market uncertainties.

Domestic Venture Capital Needs to Fill the Gap

The decline in big-ticket investments has created a funding gap that Indian startups must navigate.

“We need later-stage domestic VC funds to complete the funding life cycle. Until now, large rounds have come from international funds that are less active now,” said Archana Jahagirdar, founder and managing partner at Rukam Capital.

Many global VC firms are taking a wait-and-watch approach, awaiting clarity on US government tariffs and policies. According to Murali Krishna Gunturu, partner at Inflexor Ventures, it could take six months to a year for large-scale funding deals to make a strong comeback.

Early-Stage Startup Deal Sizes Are Growing

Despite the cautious sentiment, early-stage startups are witnessing an increase in deal sizes and valuations. Investment rounds for these companies have grown from $5-6 million to $8-10 million, with valuations seeing a 25-30% surge.

Zeta’s Strategy for Growth

For Zeta, a strong financial strategy and the ability to sign large customers have been critical in securing investment at a higher valuation. The company is on track to achieve profitability by March 2026.

As Indian startup funding navigates a shifting landscape, the emphasis remains on sustainable, profit-driven businesses. While big-ticket investments are limited, the rise of mid-sized deals and domestic investor participation is shaping the future of the ecosystem. In the coming months, clarity on global economic policies and investor sentiment will determine the pace of large funding rounds in India.