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........

© Inc42