India’s startup ecosystem is undergoing a sharp strategic reset in late 2025, moving decisively away from growth-at-all-costs consumer internet models toward DeepTech-led innovation and disciplined profitability. Recent funding data, investor surveys, and market activity up to November 15, 2025, indicate that while capital inflows have slowed, conviction around technology-first, revenue-focused businesses has strengthened.
Funding Slows, Investor Participation Holds Firm
Total startup funding in India fell 38% year-on-year to $2.1 billion in Q3 2025, covering over 240 deals between July 1 and September 28. The slowdown was most pronounced at the late stage, where funding declined 54% year-on-year to $1 billion. Despite this contraction, investor engagement remained resilient. The number of unique investors rose 7% year-on-year to 676, while the median ticket size stayed steady at $3 million, suggesting selective but consistent deal-making.
Investor sentiment reflects caution rather than retreat. More than 70% of Indian investors reported no exits in Q3 2025, yet secondary sales emerged as the preferred liquidity route for 2025, underscoring a pragmatic shift in exit expectations.
AI-Driven Restructuring Reshapes Operations
A defining feature of 2025 has been widespread corporate restructuring driven by automation and cost rationalisation. Indian startups laid off more than 5,649 employees in the first nine months of the year, largely as part of profitability-focused realignments enabled by AI.
Conversational AI unicorn Gupshup cut around 500 roles in April 2025 and another 100 in September, citing operational efficiency gains through automation. VerSe Innovation, the parent of DailyHunt and Josh, reduced its workforce by 350 employees in May to redirect capital toward AI-led content and operations. Ola Electric also announced plans to cut over 1,000 jobs in March 2025, pointing to restructuring and AI automation of front-end processes.
These moves highlight a broader industry pattern: AI is no longer just a product differentiator but a core lever for reducing costs and extending runway.
DeepTech Gains Ground in Funding Priorities
While overall funding volumes declined, DeepTech gained prominence. Artificial Intelligence emerged as the top sector by funding amount at the seed stage in Q3 2025, reflecting strong early-stage conviction. Investor surveys indicate growing agreement that India must prioritise foundational technologies such as AI, semiconductors, and drones over consumer convenience apps.
However, challenges remain. High capital requirements were cited by 37% of investors as the biggest barrier to DeepTech growth, while 29% pointed to the lack of patient, risk-tolerant capital. Portfolio exposure remains measured: 41% of investors allocate 20–40% of their capital to AI, while only a small minority treat it as a core focus.
Emerging DeepTech Leaders Take Shape
India’s DeepTech pipeline is becoming more visible through platforms such as the Nasscom Emerge 50 Awards 2025. Startups recognised this year reflect a focus on fundamental technology rather than incremental consumer solutions.
CodeAnt AI is building what it claims to be the world’s first AI Code Health Platform, capable of reviewing, fixing, and securing enterprise code across more than 30 programming languages. SCIKIQ Data is developing an “AI nervous system” to convert fragmented enterprise data into AI-ready infrastructure for governance and machine learning workflows. In biotech, Peptris Technologies is using AI to accelerate preclinical drug discovery, aiming to cut R&D timelines threefold and reduce costs by up to 10 times.
Enterprise-focused players are also scaling. NextBillion.ai provides AI-driven mapping and routing for hyperlocal logistics, helping enterprises improve fleet utilisation by 25% and reduce costs by 20%. TensorGo Software is building emotionally adaptive digital teammates that integrate into enterprise collaboration tools to deliver real-time insights and faster decision-making.
Public Markets and M&A Offer Exit Signals
While private funding remains tight, public markets and consolidation have provided pockets of optimism. FinTech major Pine Labs completed a successful IPO in November 2025, raising nearly $440 million and ending its debut trading session 3.9% above its listing price. The listing benefited from regulatory reforms introduced by SEBI in September 2025, which eased IPO requirements related to founder ESOPs and minimum public shareholding.
Mergers and acquisitions have also accelerated, particularly in FinTech, where deal activity rose 45% year-on-year in the first half of 2025. The trend has been driven by the venture capital slowdown, the push toward profitability, and the need to acquire specialised technology, including AI-led risk and debt management capabilities.
On the investment front, Rainmatter by Zerodha emerged as one of the most active investors in Q3 2025, completing 10 deals and backing startups such as OnFinance AI, troovy, and thermoflyde.
Early-Stage Optimism Anchors 2026 Outlook
Despite near-term caution, confidence in the ecosystem’s long-term trajectory remains intact. Around 58% of investors are most optimistic about early-stage startups in 2026, viewing the current downturn as a filtering mechanism rather than a collapse. More than half of investors expect the funding environment to improve next year, even as geopolitical risks and stricter LP scrutiny persist.
The broader message from late 2025 is clear. India’s startup ecosystem is prioritising durability over speed, technology depth over surface-level scale, and profitability over vanity growth. Companies that adapt to AI-led restructuring, secure patient capital, and navigate an evolving regulatory landscape are likely to define the next phase of India’s digital and DeepTech economy.
