Indian VC Funds In 2025: New Faces, New Models And New Horizons  

Investors expect a bullish year ahead for startup funding, but that doesn’t necessarily mean a great 2025 for venture capital (VC) funds and private equity firms in India.

Our Indian Tech Outlook 2025 series has delved into individual sectors such as GenAI, fintech, edtech, ecommerce and gaming, all of which are likely to throw up a few surprises for Indian VC funds and startups investors.

The mood in the ecosystem has certainly lifted after 2024, which showed more signs of maturity in terms of public listings, a push towards profitability, the propensity of consumers to pay more for services, as well as the rapid rise of new models such as quick commerce which are giving a new lease of life to relatively older sectors such as ecommerce, logistics tech and delivery services.

But as we turn the spotlight to VC funds in India, there’s still a lot of churn in the pool. We know that the past two years have seen a number of new funds emerge, with a lot of dry powder waiting to be deployed in the Indian startup ecosystem.

VC Funds In India: The Trajectory In 2025

For one, the exodus of partners and fund managers has led to a dearth of experienced talent at some of the most prominent funds in India. As a result, a lot of the legacy funds are in the process of consolidating leadership and establishing new decision makers.

This has fuelled the launch of new funds, but most of these funds are going after the same pie — early stage bets and a sharp focus on AI. Many of these funds are built in a micro VC mould, which has created a new glut of investors in the market, and a lot of the froth will separate from this mix in 2025.

The other big hurdle of 2024 was the increased compliance burden on Indian venture capital funds — particularly with regards to the certification compliance that will come into effect from May 2025.

This has complicated operations at VC funds, as we covered towards the end of the year, but has coincided with fund closing cycles at some of the legacy firms that have been active since 2012 and 2013.

All these factors have come at a time when pre-IPO rounds and secondaries have become the flavour for larger funds. But it’s also created a tunnel vision around exits and fears around the bubble bursting.

That’s what’s bubbling on the surface — let’s dive deeper into how the VC ecosystem is changing as we step into 2025.

Pre-IPO Rounds Become Late Stage Engines 

As we have recounted in our review and outlook series for a number of sectors, the nature of pre-IPO rounds is fast evolving. In fact, at the late stage, many rounds can now be categorised as pre-IPO, seeing as they often come with exit conditions.

As per our conversations with investors, startups are now looking to raise a significant round without an eye on the valuation, with promises of an IPO in the next two years. But this means that investors are scrutinising the use of funds more closely, akin to how it happens in the public markets.

Besides being crucial liquidity events for early investors, these late stage rounds are helping companies build stronger foundations before going public.

Startups are also being compelled to be more compliant with filing and disclosure norms by investors that are infusing funds at the pre-IPO stage. This has resulted in a shift in the hiring patterns as well, with most investors now being engaged to rope in experienced finance and operations professionals, rather than splurging money on tech talent.

While earlier the likes of BYJU’S, OYO, Meesho, PhonePe, Paytm, CRED, Ola Cabs and other large unicorns raised mega rounds at Series E or Series F stages, the pre-IPO wave has all but erased these stages from the market.

Domestic Funds Turn To QIP Route

On the institutional front, QIPs are emerging as a competitive front with notable examples in 2024 —  Zomato’s INR 8,500 Cr refuel, Nazara’s INR 855 Cr preferential placement or Zaggle’s INR 595 Cr QIP.

Overall, more than INR 1 Lakh Cr was raised by listed companies through QIPs in 2024. In 2025, we expect several such QIPs from the cohort of new-age tech companies that went public between 2021 and 2023.

The primary factor is the high degree of liquidity in the mutual fund industry, which has recorded positive net equity inflows every month since March 2021. SIP contributions crossed INR 2,500 Cr mark  for the first time in October. Adding to this, the bullish market has stretched valuations, which is enabling promoters to dilute their equity for greater value than raising debt.

As of today, the market is still favourable for high valuations as indicated by the premium earned by MobiKwik, BlackBuck and Swiggy towards the end of 2024. This only adds to the notion that more companies will be lining up for the domestic institutional capital through QIPs.

Indian VC Funds See Big Spurt In Strategic M&As 

After a 20% spike in funding for the year in 2024, the next year is expected to see an even bigger jump. But when it comes to M&As the picture was bleak in 2024.

What might change in 2025 is the focus on strategic bets that could unlock value down the line for listed companies and large scaled-up startups that may have IPO plans in the pipeline.

Mergers and acquisitions fell to an all-time low since 2014, there is a consolidation wave imminent as listed new-age companies with healthy cash reserves look for the right deals. The capital flow is heavier towards public markets, which has tilted the M&A market.

Another factor that potentially adds to this notion is the rise in private equity (PE) activity in India. Between January and November 2024, the total PE inflow nearly touched $31 Bn across more than 1,000 deals. Startups in healthcare, green energy and manufacturing sectors are said to be on the radar of PE-backed corporations and conglomerates.

No Stemming The Secondary Deals Wave

The year 2024 witnessed a wave of secondary deals in the Indian startup ecosystem as VCs offloaded stakes via such deals in multiple startups like Capillary, ixigo, Urban Company, Porter, Pocket FM, among others.

Amid the increase in secondary transactions, startup founders also saw a jump in the interest in secondary deals. As per Inc42’s annual survey, 60% of the 100+ surveyed founders revealed that investor interest in secondary transactions “increased” in 2024.

Up to 35% of the surveyed founders said they see a “moderate” increase in interest for secondary transactions, 25% saw “significant increase” in interest from investors for such deals. This indicates that VC and PE firms are keen on backing well-established new-age tech companies and don’t mind entering the cap table later in the game.

Expect more such deals as funds from the 2012-2013 vintage reach expiry dates in 2025, and VCs look to offload their portfolio to return funds to the LPs.

New Models, Structures In The AIF Cupboard

When Peak XV Partners announced a new fund called Peak XV Anchor Fund with capital from its internal balance sheet, many saw it as a signal of how things will evolve for some of the more mature VC firms in India.

In Peak XV’s case, the launch of the evergreen or rolling fund allows the firm to stretch beyond its current mandate of focussing only on India, and allows it to pursue a legacy even more removed from Sequoia Capital in the US after the two entities separated in 2023.

It would not be a surprise to see other legacy firms pursue a similar structure to launch rolling funds, especially after realising gains from exits from IPOs in 2024.

Rolling funds reduce the burden on fund managers to raise new funds and engage with LPs as the firm invests through its own profits, and makes it easier for funds to find coinvestment partners in non-core sectors or geographies.

In addition to new structures, some funds in India have also implemented unique fee models more suited for the needs of the Indian market and Indian LPs. Expect more such models to come to the market as funds try to build competitive moats to raise funds from LPs.

Niche, Micro VC Funds To Continue Chasing AI High

The AI boom has not only turned the heads of entrepreneurs, but also experienced (and not so experienced) general partners (GP) and fund managers.

Typically speaking, micro VC funds are set apart by the fact that they have a special focus or a highly evolved thesis, thanks either to the fund manager’s expertise in a particular niche or whitespaces in the market. In 2025, AI is still a white space, given that there’s still plenty of headroom for innovation and maturity, especially in India.

Data shows that the number of new funds in India has seen an exponential growth over the past three years, and a lot of the activity is geared towards the early stage, where micro VC funds have become a distinct category similar to angel funds.

A lot of this is down to the all-new opportunity that’s opened up in the wave of the GenAI revolution, but it’s not just native AI companies raising the funds. Those with a data advantage are leveraging investor interest to pitch niche models that could solve vertical-specific challenges or target non-sophisticated consumers.

AI’s spillover impact will also be seen in fintech, SaaS, ecommerce, consumer services and healthcare, and startups in every sector are now looking to position themselves as AI-first.

With the micro VC boom, have come fears of a frothy market, where inexperienced GPs are looking to cash in on the buzz. While we are not yet in a bubble, having a glut of investors and not enough depth in the market could result in a few issues around due diligence towards the end of 2025.