Global venture capital funding surged to $120.7 billion (approx. Rs 10.60 lakh crore) in the September quarter, its best three-month run in more than two years, according to KPMG’s Venture Pulse Q3 2025 report. But India sat on the sidelines of that recovery.
KPMG said nearly two-thirds of new venture money went to US-based startups, led by artificial intelligence deals that soaked up record capital. India, by contrast, could not ride the global inflow momentum. Domestic venture investment held steady at around $3.2 billion (approx. Rs 28,100 crore) in Q3 2025, almost unchanged from $3.1 billion (approx. Rs 27,220 crore) in Q2 2025, as investors delayed large cheques amid tariff uncertainty and a tighter focus on profitability.
The US VC market dominates on AI surge
The United States accounted for the largest share of global funding $80.9 billion (approx. Rs 7.10 lakh crore) from 3,175 deals in Q3, driven almost entirely by AI majors. Anthropic raised $13 billion (approx. Rs 1.14 lakh crore), xAI secured $10 billion (approx. Rs 87,810 crore), and Reflection AI $1 billion (approx. Rs 8,781 crore). France’s Mistral AI also closed a $1.5 billion (approx. Rs 13,172 crore) round, but outside the US, few could match the scale.
“The cautious optimism we saw last quarter has turned to genuine optimism,” said Conor Moore, Global Head, KPMG Private Enterprise. “AI remains the hottest vertical, defence tech continues to attract strong interest, and fintech has had an excellent year.”
KPMG’s data showed that AI and related technologies together pulled in more than half of global VC capital this quarter. The report noted that investors are concentrating larger cheques in fewer, AI-centric deals, marking a structural shift in global venture allocation.\
India misses the AI-driven funding cycle
KPMG pointed out that India’s startup ecosystem lagged behind in attracting AI-linked capital, which limited its participation in the record global quarter. The report attributed this partly to the nascent state of India’s deep-tech ecosystem, fewer scaled AI product firms, and ongoing macroeconomic caution among late-stage investors.
“The speed bump that was the US tariffs slowed investment,” said Nitish Poddar, Partner and National Leader for Private Equity at KPMG India. “But macros are still strong, the capital markets are vibrant, and a lot of capital has been raised that will need to get deployed. Funding should increase as uncertainties calm. Investors are now focused on profitability and cash flows because without those, you won’t get a capital-market exit.”
KPMG said that while India’s early-stage deal volume held steady, large-ticket funding remained scarce. No single Indian transaction crossed the $250 million (approx. Rs 2,195 crore) mark in Q3. The largest was Mitra’s $140 million (approx. Rs 1,230 crore) raise in consumer logistics, followed by mid-sized fintech and SaaS rounds.
Exits turn positive even as funding stays flat
Despite the subdued inflows, India’s exit environment improved. KPMG said the IPO window reopened selectively, and domestic capital markets provided long-awaited liquidity.
Urban Company’s debut on the Mumbai National Stock Exchange and the price appreciation on listing day became a case study aboutß investor appetite for profitable tech firms. Other smaller exits came via secondary sales and strategic acquisitions.
The report said this resurgence of exits contrasts sharply with the weak fundraising, showing that India’s startup ecosystem is “shifting from cash-burn growth to cash-flow visibility.”
Asia’s mixed picture: Hong Kong and China pull ahead
Asia, as a region, attracted $16.8 billion (approx. Rs 1.48 lakh crore) in venture funding, with China contributing half. AI and industrial technology deals dominated Chinese and Hong Kong flows, while Southeast Asia saw modest activity in fintech and logistics.
KPMG said Hong Kong has re-emerged as a preferred listing hub for growth-stage companies seeking public market liquidity. “Numerous biotech and technology firms are opting for Hong Kong due to its accessible capital markets. The city has solidified its position as a vital exit route for China’s growth-oriented enterprises,” said Angela Chiu, Director at KPMG China.
Japan’s venture funding slipped to $1.3 billion (approx. Rs 11,415 crore) from $1.6 billion (approx. Rs 14,050 crore) in the previous quarter as investors turned cautious amid higher interest rates and trade friction, as per KPMG.
Europe steady, US momentum widens the gap
Europe managed $17.4 billion (approx. Rs 1.53 lakh crore) in venture funding, up from $15.2 billion (approx. Rs 1.34 lakh crore) in Q2, led by France’s Mistral AI and the UK’s Nscale. KPMG said this reflected renewed confidence in European scale-ups capable of competing globally, but the capital gap with the US is widening.
The US accounted for almost two-thirds of all VC money raised worldwide in Q3, underlining its dominance in both AI and late-stage growth funding, as per the report.
India’s structural strengths remain intact
KPMG said India’s weaker VC inflows do not imply a downturn in fundamentals. Domestic macros remain supportive a growing consumer base, strong household savings, and deepening stock-market participation. “Should trade uncertainties be resolved, VC investment will begin to rebound,” the report said.
The firm also noted that India’s financial markets and startup profitability are healthier than during the 2021 boom years. This, it said, “creates a cleaner base for the next investment cycle.”
Global outlook: AI optimism to continue into 2026
KPMG expects global VC activity to remain steady in Q4 2025, with continued focus on AI, robotics, and enabling infrastructure. Sectors such as fintech, healthtech, and climate tech are likely to attract attention in emerging markets.
“The market feels positive again,” Moore said. “Companies that went public earlier are performing well, and new listings have delivered strong results. All indicators point to continued strength.”
Global investors are writing bigger cheques again, but most of that money is chasing scale in markets that already lead in advanced technology. India isn’t short on ideas or entrepreneurs; it’s waiting on conviction. The strength this quarter wasn’t in raising new capital but in proving that the ecosystem can return it, through profitable, well-timed exits. That shift from chasing valuation to delivering value is what will decide how strong the next investment cycle really is.