VCs Cut Ticket Sizes Amid Uncertainty; Will 2025 Fare Better?

The Indian startup ecosystem made a strong comeback in 2024 after weathering a harsh funding winter in the previous two years. The market is still in a rational mode. But investors, long been sitting on dry powder, finally loosened their purse strings and injected $11.75 Bn across 994 deals. This marks a 19.04% jump in total funding (between January and December 21) compared to $9.87 Bn raised from 908 deals in 2023.

Conversely, ticket sizes across key industries shrank considerably despite the renewed momentum. Excluding the mega-deals (valued at $100 Mn and above) in 10 key sectors, Inc42 assessed average ticket sizes and our findings indicated an interesting shift in sync with the global trends. As outlined in the table below, cleantech emerged as a standout performer, recording the highest YoY growth in average ticket size at 32.13%, rising from $8.4 Mn in 2023 to $11.05 Mn in 2024. Healthtech followed with a 28.03% increase, trailed by fintech (21.5%), deeptech (10.42%) and enterprisetech (7.2%).

Ashwin Raguraman, managing partner at Bharat Innovation Fund (BIF), an early-stage, deep tech-focussed venture capital firm, noted that deal value and volume would be poised for sustained growth in cleantech and deeptech. The reason? The number of funds investing there is steadily rising, given the global relevance of these sectors.

“Previously, only sector-focussed funds were active in deeptech and cleantech. But 2024 saw a surge in interest from generalist VCs who have completed their due diligence. So, we will come across more deals and higher ticket sizes in these sectors,” said Raguraman.

“The only catch here is the long gestation period. People may not have the appetite for such long cycles. Or they may choose to come in a little later, even if they are ready. That is the only reason, if any, why capital may not flow at the pace we would imagine.”

In stark contrast, logistics saw one of the worst slides in average ticket size. It plummeted by 62.32% YoY, from $11.9 Mn in 2023 to $4.5 Mn in 2024. Media and entertainment followed with a 39.5% drop, while agritech and ecommerce declined by 19.61% and 10.29%, respectively.

A close look at investor sentiment suggests certain sectors become less conducive to equity funding as respective ecosystems mature or VCs gain enough exposure to industries and their potential. This pushes investors to look for sectors and startups with clear paths to profitability, prompting others to explore alternative financing. In the ecommerce sector, for instance, many direct-to-consumer (D2C) startups now prefer revenue- or cash-flow-based loans or go for a debt-equity mix to raise working capital.

“Valuations in ecommerce and D2C are becoming more conservative, which has led to reduced funding per round as investors target realistic growth metrics,” said Sandiip Bhammer, founder and managing partner at Green Frontiers Capital, a US-headquartered and climate tech-focussed VC fund. “Alternative financing such as debt or [debt-equity-based] hybrid rounds help founders avoid stake dilution and focus on more disciplined, profitability-driven growth.”

Again, industry segments such as SaaS (and its many domains), supply chain management (logistics is a subsector within SCM), KYC mapping and big data are emerging as digitally scalable lean operations. Hence, they require smaller initial investments, positioning them as attractive opportunities. Therefore, capex-heavy sectors like edtech, ecommerce [inventory models], or certain fintech businesses are no longer funding priorities for investors with a focus on innovation and efficiency, explained Bhammer.

Is The Decline In Average Ticket Size A Major Concern?

Not quite. According to many investors with whom Inc42 spoke for a deep dive into the current funding landscape and 2025 projections, the situation is, by no means, as grim as it was in 2022 and 2023. Instead, it reflects a maturing ecosystem where startups are working on their progress towards growth milestones and investors are well past their extremes – from a funding downpour to a funding freeze.

As Pranav Pai, founding partner at the early stage VC firm 3one4 Capital, emphasises, the decline in average ticket size in 2024 indicates a market recalibration that started two years ago. It was a knee-jerk reaction after the frenzy of FOMO-driven funding at lofty valuations in 2021 when Indian startups raised $44 Bn across 1,584 deals. Most businesses failed to justify their valuations (and the kind of capital they raised), compounded by exit woes, which left over-optimistic investors in the lurch. Understandably, Covid-19 was a business dampener in many cases.

In the subsequent years, investor sentiment was further tempered by stock market volatility, a prolonged economic downturn and geopolitical conflicts like the Russia-Ukraine war and the Israel-Palestine crisis.

Pai’s observation aligns well with the emerging data trends shown below.

Amid these market corrections, investors became more selective, backing fewer startups and expecting strong governance and sustainable unit economics.

“Venture capital itself is a power-law game, which means a few investments in a portfolio tend to generate maximum returns. As a result, fewer companies win over time, while most fail,” said Bhammer. It also explains why VCs today are looking for a few ‘quality’ companies capable of providing astronomical returns but are wary of investing too much in startups which do not tick all boxes.

This pattern of writing big cheques for ‘quality’ companies alone while limiting the ticket size for others could be as disturbing as the previous trend of overfunding. Does it mean businesses raising mega-rounds at this point will be under tremendous pressure to deliver at the earliest by hitting profitability and enabling quick exits?

Some recent examples: Despite the collapse of edtech in India, Physicswallah (with a similar business model like the former decacorn BYJU’S and now facing similar operational challenges) bagged $210 Mn in September 2024 while Eruditus Executive Education raised $150 Mn a month later. Globally, Mistral, the Paris-based OpenAI challenger, raised a whopping €468 Mn equity round in June this year after raising €385 Mn in December 2023.

However, not too many industry insiders think large-scale but selective VC funding is chomping off the average ticket size of promising startups minus the ‘celebrity’ tag. After all, if the VCs have the dry powder to deploy, they are bound to chase a few opportunities more intently.

“In sectors with high mortality rates, mitigating risk is critical. This involves spreading smaller investments across a wider pool of startups and geographies, or structuring rounds into milestone-based tranches – practices that naturally result in reduced ticket sizes,” said Padmaja Ruparel, cofounder of Indian Angel Network (IAN).

Which Sectors Will See Bigger Ticket Sizes In 2025?

During an interaction with Inc42, BIF’s Raguraman talked about a critical metric which helps assess investor sentiment – the interplay between the deal volume in a specific sector and their average ticket size. These two components can be directly or inversely proportional depending on investor interest, and the analysis provides a lens to where investors’ focus will likely shift.

Let us look at the table below to understand the interplay and the emerging trends.

Key sectors likely to capture maximum investor interest: According to our analysis, investors will be most bullish about five sectors in 2025. These include cleantech, deeptech, enterprisetech, healthtech and fintech, as they have shown YoY growth in both deal volume and average ticket size in 2024, signalling strong investor confidence.

Among these sectors, investment in healthtech saw a major increase in 2024. If we do not consider the $216.2 Mn fundraising by PharmEasy (a down round where the e-pharmacy took a 90% valuation cut), the sector raised around $499.5 Mn across 77 deals. This marks more than a 100% rise from the total funding secured in 2023 – $248.74 Mn from 65 deals.

Namit Chugh, principal at the healthtech-focussed VC fund W Health Ventures, attributed this growth to targeted subdomains that have demonstrated scalable and successful business models. Among these are healthtech SaaS, AI-based tools and a host of startups providing domain-specific solutions for eye and dental care, IVF and maternity care, weight control, cosmetology, remote patient monitoring and more. Their viability as standalone businesses away from traditional hospitals will continue to attract investor interest. Notable examples include startups like Dozee, Qure.ai, Toothsi, Element5, Mylo, Elevate Now and Nivaan.

However, healthtech funding rounds have been relatively modest in the past five years, as the sector is growing at a calibrated valuation and ticket size. In 2024, Qure.ai raised $65 Mn, the largest healthtech round minus the mega-deals. In contrast, the fintech and D2C sectors saw much bigger rounds. For instance, alternative lending startup Finova Capital raised $135 Mn, while fine jewellery D2C brand BlueStone bagged $107 Mn.

Talking about these roller-coaster trends among the few bright spots, Chugh emphasised the importance of sector-specific dynamics in shaping funding patterns. “Customer acquisition costs are a major factor,” he said. “Financial services and D2C businesses often require higher investments due to elevated acquisition costs, resulting in larger deal sizes.”

Funding data between 2022 and 2024 solidify this point. Lending-focussed fintech startups raised $4.7 Bn during this period, accounting for 45.19% of the $10.4 Bn total funding secured by fintechs. Similarly, D2C startups netted $3.9 Bn, or 52.7% of the total ecommerce funding at $7.4 Bn. On the other hand, healthtech startups raised only $2.25 Bn during 2022-24, with fitness and wellness ($258 Mn across 47 deals), healthcare SaaS ($362.3 Mn from 47 deals) and telemedicine ($376 Mn across 45 deals) leading the charge.

“The sector is still maturing, but customer acquisition costs in healthtech are lower because healthcare spending is often a necessity, not discretionary, unlike consumer-facing sectors. Preventive healthcare further reduces the need for aggressive customer acquisition efforts. Hence, there is a high possibility that we may not see a flurry of mega-deals similar to fintech or consumer-focussed industries,” said Chugh.

However, a deep dive into unique areas will drive the growth trajectory of this sector. Healthtech startups in India primarily focus on digitalising data and processes, service aggregation, early detection of medical conditions and hardware development (read medical devices). But few are exploring transformative areas like ground-breaking R&D or AI-driven drug discovery although these have tremendous growth potential. Consider this. IIT-Bombay, Tata Memorial Centre and other research partners announced a homegrown gene therapy to fight cancer earlier this year. Ambitious startups may soon follow suit across domains to impact the investing landscape.

Key sectors which may attract selective investor interest: A look at other outcomes per our analytics chart reveals that investors may continue to explore opportunities in edtech, agritech, ecommerce and media & entertainment. For one, the average ticket size increased in edtech despite a dip in deal volume in 2024. The other three sectors witnessed a rise in deal volume, although the average ticket size shrank. However, logistics may face a decline in deal volume and size in 2025, given its overall decline in 2024.

Edtech funding, in particular, will remain shaky. Although Physicswallah and Eruditus bagged mega-deals, the sector could only manage $208 Mn across 27 deals if we leave those two out. The Indian edtech space, once lauded globally for its meteoric growth, is now struggling after industry giants like BYJU’S and Unacademy were knocked off their pedestals.

In spite of these headwinds, optimism persists. PhysicsWallah, preparing for a public listing in 2025, recently transitioned to a public company. Singapore-based Eruditus is also mulling reverse flipping, the option to shift the parent company back to India, as it looks to list on the BSE or the NSE. Will they bring the spotlight back on building a sustainable landscape in the post-BYJU’S era, signalling a continued belief in India’s edtech market?

Investors are also eyeing niche subsectors like edtech SaaS (raised $45.79 Mn from four deals) and skill development ($35.76 Mn secured across 11 deals). Together, they accounted for 55.55% of the total edtech deals in 2024 and 39.20% of the total funding of $208 M excluding mega deals. Among these were startups such as Kreedo, Beyond Odds, byteXL and more.

“Edtech has already absorbed substantial capital, but the returns have yet to materialise fully,” said an angel investor who did not want to be named. “Now, investors are shifting to startups offering strong product differentiation and a solid go-to-market (GTM) strategy.”

Will VCs Bounce Back In 2025 To Boost Indian Startups?

All said and done, the Indian startup ecosystem entered a new phase in 2024, marked by adaptability and business maturity, which paved the path for sustainable growth. Capital inflow into promising sectors, an uptick in IPOs and new fund launches are bound to drive robust recovery and forward momentum, boosting investors’ confidence. Founders and investors must shift gears to take on the challenges ahead. Meanwhile, Inc42 has zeroed in on four emerging trends of 2025.

Early stage funding will remain stable, but the approach will be more selective, with a clear shift towards quality over quantity. Investors will look for founders who can achieve product-market fit while running lean and efficient operations. In a maturing ecosystem, the focus will be on businesses that are innovative and operationally sound, capable of scaling while managing risks in an increasingly competitive market.

Growth and late stage deals may pick up momentum for companies that have weathered the recent market turbulence and come out stronger for scale and value addition. Late stage startups may see a significant funding boost when global investors regain confidence. Clear exits, a growing appetite for tech-driven startup narratives and investor trust in India’s maturing public market will intensify the growth drive.

A deep pool of domestic capital will create long-term value. Indian startups will see a significant surge in capital flow as homegrown limited partners (LPs), pension funds, insurance companies, family offices and retail equity investors step in to support the next wave of innovation. In fact, a fast-growing pool of local investors can create many opportunities for startups and the broader economy while reducing their reliance on foreign capital.

“This trend is supported by India’s rising economic stature, policy confidence and the ongoing shift of household assets from idle savings into more productive vehicles like mutual funds and equities. As a nation, we must nurture and grow the next generation of companies that will drive shareholder value, akin to the legacy of the best Indian corporations such as Infosys and HDFC, which have been doing it for the past three decades,” said Pai of 3one4 Capital.

Public markets will be ready to support startups’ innovation culture: Perhaps the most critical development will be the increasing number of startups going public. Entering the public markets will create new opportunities for innovation, investment and long-term cycles of value creation and economic growth. The next chapter for startup innovation is just beginning, and the outlook has never been more exciting.

[Edited by Sanghamitra Mandal]