How Funding, Valuations And Execution Are Being Rewritten In Ecommerce

For over a decade, Ecommerce has functioned as the backbone of India’s consumer internet story, repeatedly absorbing capital across market cycles, formats, and business models. Even as venture funding entered a phase of correction, ecommerce did not lose relevance. Instead, 2025 marked a year of recalibration — capital continued to flow, but under materially different expectations.

In 2025, ecommerce startups raised $1.7 Bn across 206 deals, reinforcing the sector’s position in India’s startup ecosystem. While funding levels remained below the peak years of 2021 and 2022, deal activity suggested that investors had not stepped away from the sector. Rather, they had become more selective about where, when, and how capital was deployed.

In value terms, ecommerce ranked third in 2025, behind fintech ($2.5 Bn) and enterprise tech ($1.8 Bn). However, it led on deal volume. The numbers point to a sector that continued to attract capital across stages, even as cheque sizes and risk appetite underwent recalibration.

Part of this resilience was driven by the combined momentum of ecommerce and quick commerce. As Fireside Ventures’ cofounder and partner Kannan Sitaram pointed out, “consumer internet companies entered the year with aggressive operating plans and largely delivered on them”.

According to him, the structural expansion of digital commerce in India, which is marked by rising online adoption and higher purchase frequency, supported growth across portfolios.

“Ecommerce and quick commerce together have had a very good year for our companies. Digital commerce is getting wider, with more people buying and buying more often,” Sitaram said.

Sitaram added that Fireside completed 15+ early stage ecommerce investments in 2025, along with multiple follow-on rounds, remaining active through the year, particularly at the venture and early stages.

Funding Returned, But Distribution Shifted In 2025

Aggregate funding figures, however, conceal sharp differences across stages of investment. According to Inc42, seed stage ecommerce startups raised $105 Mn across 92 deals in 2025, compared to $127 Mn across 89 deals in 2024. While seed stage funding declined in value terms, the increase in deal count indicates that investors continued to back new ideas, albeit with smaller cheques and higher scrutiny.

At the growth stage, funding and deal activity remained largely stable, reflecting a phase of consolidation as companies worked towards efficiency and margin visibility. Late stage funding, meanwhile, saw a sharper rise, with capital pouring into companies with operational maturity and clear paths towards profitability.

This shift aligns with a broader change in investor expectations. According to Alvarez and Marsal’s managing director Mani Singhal, the ecosystem has moved away from an earlier phase of scale at any cost. Over the past two years, the focus has shifted towards sustainable economics, signalling a more mature funding environment.

While growth continues to remain important across companies (from early stage startups to unicorns), investor conversations are increasingly centred on timelines to break even and pathways to profitability. Even where profitability is not achieved across the entire business, clarity at a segment level has become essential. Customer acquisition still matters, but margins have moved to the centre of funding discussions.

“When do we hit breakeven? When do we start delivering profitability — if not in all, then at least at a segment level? The margin narrative has become extremely important now across all stages,” Singhal added.

The table below breaks down ecommerce funding across stages in 2024 and 2025, illustrating how capital allocation has evolved even as overall deal activity has remained stable.

The Funding-Valuation Discipline In 2026 

According to Inflection Point Ventures’ founder Vinay Bansal, funding in ecommerce is expected to continue flowing towards strong brands and credible founders, with overall ticket sizes only set to increase.

However, at the angel stage, momentum could soften due to SEBI’s accredited investors rule, which restricts participation from smaller investors in this asset class. This, he noted, could pose some challenges at the very early stage. From the perspective of VC funds, funding activity is likely to continue rising.

While seed and growth stage investments are expected to follow a familiar trajectory, late stage capital — particularly in growth, buyouts, or secondary-only transactions — will be more selective. Most late stage firms are expected to focus on sectors that are expanding and companies within them that are outpacing overall industry growth.

As highlighted by Rajiv Batra, CFA-Director at Chrys Capital, from a late stage investor standpoint, three operational metrics will remain critical — gross margin, CM2 (contribution margin after all expenses, including marketing), and EBITDA (as a proxy for cash flow).

From a validation perspective, ecommerce valuations in 2026 are expected to be anchored on a profitable scale. As Praharsh Chandra, cofounder & CBO at Shadowfax highlighted, in 2026, ecommerce valuations will be defined by profitable scale. It’s no longer a choice between growth and efficiency; rather, operating efficiency has become the “basic hygiene” required to validate growth. While top-line expansion remains crucial, investors will specifically reward growth that is backed by predictable cash flows and high-quality revenue.

“In this cycle, retention and repeat behaviour are the multipliers that turn raw scale into sustainable enterprise value,” Chandra added.

The Changing Math Of Ecommerce Subsectors

Ecommerce has lowered entry barriers across categories, allowing challenger brands to compete with incumbents, but high churn continues as the channel remains structurally unprofitable for many.

With low customer stickiness and deal-led behaviour, brands that have scaled successfully are the ones with a strong multi-channel strategy, where a significant share of sales comes from owned channels such as D2C or offline. For example, in categories such as mattresses, growth has slowed for most players, including legacy brands, while a few scaled brands continue to grow largely through their own channels.

While ecommerce remains relevant, excessive dependence on it makes sustained profitability difficult. At the same time, the rise of quick commerce is adding pressure on ecommerce, particularly in convenience-led categories such as packaged foods, personal care, beauty, and daily essentials.

Overall, as per Chandra, fashion is expected to continue driving volumes, aided by the acceleration of fast fashion. However, categories such as beauty, personal care, health, and everyday essentials are increasingly acting as stabilisers, driven by habitual consumption, frequent purchases, and low seasonality.

Channel dynamics are also shifting.

General trade has historically been the most profitable channel for legacy businesses, but quick commerce is now taking over in the top 20–30 cities, especially in convenience-led categories. Brands that can execute consistently on quick commerce while maintaining a strong general trade presence are expected to benefit from better economics and stronger margins.

Operational Excellence As The Next Growth Lever

Own manufacturing is emerging as a critical factor in building scalable businesses in India, as it allows companies to control a significant portion of the value and supply chain. This control enables better shock management and a stronger value proposition for customers. In addition, businesses that combine capital efficiency with best-in-class customer experience — driven by distribution strength and brand equity — are better positioned to stand out.

According to Shadowfax’s Chandra, a significant blind spot in ecommerce today is underestimating the role of end-to-end experience as the primary driver of retention.

“We have moved beyond the era of purely product-led purchasing. Today, the brand experience begins the moment a customer lands on your site and doesn’t end until the order is delivered or a return is processed,” he added.

In this cycle, he said, the post-purchase journey — speed, accuracy, and reliability — is just as crucial as the product itself. When this journey is seamless, lifetime value (LTV) expands almost automatically because trust is built into the fulfilment. However, if the post-purchase experience breaks, the brand promise breaks with it.

Market experts also note that ecommerce players are investing heavily in logistics automation and warehousing efficiency, not only to reduce costs but also in response to shifting customer behaviour. Retention is increasingly driven by experience rather than discounts. From checkout to delivery to returns, customers now expect consistency, accuracy, and speed, with automation enabling these outcomes to be delivered reliably at scale.

“The brands that win in the next decade will be the ones that treat operational excellence as a growth lever, not a back-office function. However, the critical factor is investing in the right Capex and automation at the right time and at the right cost — otherwise, you risk a poor ROCE,” said Chandra.

Looking ahead, the ability to align operational investments with customer expectations is likely to separate durable brands from the rest. As competition intensifies, execution depth will define long-term leadership.