The message from India’s venture capital ecosystem over the last couple of years has been clear: inadequate scale and frothy valuations are no longer acceptable. The bar is getting higher now.
Even two years ago, a consumer-tech startup with Rs 8-10 crore in annual recurring revenues (ARR) could raise a Series A round of Rs 30-50 crore. Today, the same company would need to show more than double of that in ARR just to get investors to the table.
It’s not just traction in revenues. Investors are now raising questions about product-market fit, profitability and cash-flow visibility. They are also evaluating capital efficiency, customer stickiness before they write out a cheque.
In the first half of 2025, Indian tech startups saw a 25% decline in funding year-on-year at $4.8 billion. In 2024, they had raised $11.3 billion, slightly higher than the $10.7 billion raised in 2023. Prior to that, tech startups bagged $25.4 billion in 2022 and $37.2 billion in 2021.
“We’re now a lot more painstaking and structured in how we assess product market fit,” Ankit Kedia, founder and lead investor at Capital-A, an early-stage VC, told FE. “It’s not just about a few customers or early adopters, we look for depth: are they coming back, are they paying, and are they talking about it positively? Referenceability matters as much as retention.”
Avik Ashar, principal at Riverwalk Holdings, observes that during 2020-2022, investors were in risk-on mode as the ecosystem was flush with liquidity and interest rates at historic lows. “That reflected in both deal velocity and check sizes,” Ashar said, pointing out that today’s benchmarks are where they should always have been”.
Industry watchers vouch for the fact that everyone’s demanding better performance. Many, like Kedia, are unwilling to back businesses that don’t have a revenue track record. “Earlier, strong narratives and pedigree could get founders through the door, but that’s less likely now,” he said.
In fact, high cash burn without a strategic moat is unacceptable, a red flag for growth-stage companies. Confirming that benchmarks on revenue, growth and other metrics have been raised across sectors, Anurag Ramdasan, partner at 3one4 Capital, pointed out that this is a natural progression. “As more startups become successful, the markers of success scale upwards,” he said.
Another early-stage investor, Ashutosh Kumar Jha, general partner at Expert Dojo, asserts that investors are no longer betting on dreams alone. “Customer acquisition costs and retention or burn multiples are no longer left unchecked for later discussions, they’re table stakes at the first meeting,” he said.
Indeed, it’s a slightly different world now, as Jha explained, a world in which downloads and vanity metrics cannot swing the deal. “We’re asking: Do users come back? Do they pay? Do they tell others? Profitability isn’t required on day one, but the roadmap must be realistic,” said Jha.
At the seed stage, where funding rounds typically range from Rs 8-24 crore, a startup with Rs 10 crore in revenue might expect to raise around Rs 8 crore at a valuation of Rs 40-80 crore. To raise money at the higher end of that range, however, they need to prove they have something unique — whether it’s product strength, founder pedigree, or early adoption. Indeed, money isn’t coming easy these days.