Vestd reports sharp contraction in early-stage financing
Investment in Indian startups fell by 8.3% in the most recent full year, making it the only market in the global ‘Big Five’ to record a year-on-year contraction, according to new research by Vestd India, registered in England and Wales with offices in India.
Early 2026 data suggested the trend is continuing, with India recording just 560 funding rounds in Q1, down from 668 in the same period last year, and 1,049 in Q1 of 2024.
The Global Investment Report, which analysed data from business intelligence platform Crunchbase, shows a marked shift in investor behaviour, with capital moving away from early-stage businesses and towards late-stage consolidation and liquidity events.
While India remains a top-five global investment hub, the number of funding rounds fell to 2,497 in 2025, trailing the UK, which recorded 3,331 deals, said the report on 5 July.
The decline was driven primarily by a sharp contraction in early-stage funding activity. Seed investment fell by 31.8%, angel funding dropped by 25.3%, and pre-seed deals declined by 21.9%, suggesting a significantly higher bar for founders seeking early capital.
By contrast, late-stage and liquidity-focused investment activity grew strongly. Secondary market deals rose by 77.2%, post-IPO debt increased by 45.7% and Series C rounds grew by 27.6%, highlighting a clear pivot towards established businesses and investor exits.
Ifty Nasir, founder and CEO of sharetech platform Vestd, noted, “India’s investment market is evolving rapidly. What we’re seeing is a clear shift away from high-volume early-stage speculation towards a more disciplined, fundamentals-driven environment. The bar for early-stage funding has risen significantly. Investors are no longer backing ideas alone – they want evidence of traction, strong unit economics and a clear path to profitability.
“The latest figures suggest that investor caution remains firmly in place. Capital is still available, but investors are being far more selective and are increasingly backing businesses that can demonstrate resilience, profitability and long-term value creation.”
The data also shows a cooling trend across the year, with deal activity slipping 11.8% in the second half of the year compared to the first, reflecting increasing investor caution.
Globally, India continues to compete for capital against fast-growing markets such as Canada, which saw a 46.4% increase in investment activity, and China, which recorded growth of 31.9%.
However, India remains a major global startup hub, ranking third in the world for emerging unicorns – companies valued between US$500 million and US$1 billion – with 43 businesses in the category. This places it behind the US (239) and China (44), but ahead of the UK (27).
Despite this, India is the only top-three market to see its emerging unicorn pipeline contract, falling 6.5% year-on-year, suggesting early-stage funding constraints are beginning to impact future scale-ups.
The report also highlights a broader global shift in investor priorities, with capital increasingly concentrated in deep-tech sectors. Artificial intelligence saw a 41.7% rise in emerging unicorn formation, followed by data and analytics (+30.5%) and science and engineering (+28.4%).
Ifty added, “The global market is not just shifting geographically, it is shifting sectorally. The next wave of growth is being driven by deep-tech innovation, not consumer convenience models.
“For India to maintain its position as a leading global startups hub, it will need to align more closely with where capital is flowing – particularly in AI, data and advanced engineering.”
Vestd India is a sharetech platform that helps private companies manage cap tables, employee stock ownership plans (ESOPs), shareholder records, and governance through one connected platform.
Following the acquisition of Trica Equity, Vestd combines local expertise in the Indian startup ecosystem with the technology and experience of one of the UK’s leading sharetech platforms. Vestd supports founders, finance teams, HR leaders, investors, and company secretaries in managing ownership with greater clarity and confidence. Fiinews.com
