Even as capital inflows remain steady this year, India’s startup ecosystem is seeing a sharp shift in how funds are being deployed across stages. In the first three months of this year, tech startups raised $3.95 billion across 350 rounds, nearly the same as last year but in barely half the number of deals.

In Q1 2025, tech startups had raised $3.93 billion across 628 rounds, as per Tracxn data.

The sharp drop in deal volume, coupled with flat funding levels, points to a market that is becoming increasingly selective, with investors writing larger cheques into fewer companies that show sustainable growth. Data showed that the median round size has increased to $2 million in Q1 from $807,000 during the same quarter last year.

Mega rounds leading the list

Despite the sharp contrast in deal volume, both the years saw a few mega rounds leading the list. The largest of them was the $1-billion Series D round raised by Erisha E Mobility in March last year from a UAE-based industrial investor. IPO-bound building materials platform, Infra.market raised $222 million as part of its Series F round in January, from investors such as Tiger Global. 

Besides this, telecom giant Bharti Airtel’s data centre arm, Nxtra, raised $710 million from Alpha Wave Global, Carlyle Group, among others, earlier this week. AI infra startup Neysa raised $600 million in a Series B round in February, backed by investors such as Blackstone, Ontario Teachers’ Pension Plan, and Nexus Ventures Partners.

Sharp pullback in seed-stage activity

Seed-stage activity saw the sharpest pullback this year, with the number of rounds nearly halving to 228 from 447, while funding slipped only to $342 million from $381 million. Early-stage investments, however, surged to $1.6 billion from $983 million, while the number of rounds fell slightly to 94 from 128 in the year-ago period. 

The rise in early-stage funding indicates that investors are willing to back startups that have clearer revenue visibility and stronger growth metrics. Meanwhile, late-stage funding fell sharply to $1.2 billion from $2.4 billion in the year-ago quarter, while the number of rounds fell to 28 from 53 in Q1 2025. 

As AI and deep-tech startups continue to crowd the seed-stage pipeline, capital is likely to become even more concentrated going forward. This might widen the gap between startups that secure early conviction from investors and those that struggle to raise capital, leading to a market where fewer winners attract a disproportionate share of funding.