Indian startup funding falls below $3 billion in September quarter: Entrackr Report

Funding for Indian startups slipped below $3 billion in the September quarter of 2025, marking a slowdown after back-to-back quarters of surpassing the threshold. The funding was driven by sizable debt rounds by PharmEasy and Eruditus, as well as pre-IPO deals involving Urban Company, IndiQube, and Smartworks. Late-stage deals for firms such as Gupshup, Truemeds, Kapiva, and The Sleep Company also contributed to the total. However, regulatory actions including the ban on real money gaming had a major impact during the quarter. This led to around 2,000 people losing their jobs, making it one of the biggest rounds of layoffs in the sector since 2023 and 2024.

According to data compiled by TheKredible, Indian startups raised approximately $2.78 billion in funding during the third quarter of 2025. This amount included 67 growth and late-stage deals totaling $2.02 billion, along with 225 early-stage deals worth $765 million. Additionally, there were 33 undisclosed deals during this period. 

Q-o-Q and M-o-M trend

Compared to the previous quarter, funding in Q3 dropped by nearly 10%. This marks the first instance that quarterly funding has dipped below the $3 billion level since Q1 2024. While quarterly funding dipped, September alone crossed the $1 billion mark for the first time in four months. With $1.22 billion in funding, September also emerged as the second largest funded month in 2025, after January’s $1.76 billion.

​​Top 15 growth-stage deals

In the September quarter of 2025, India’s top 15 funding deals reflected cautious optimism in the startup ecosystem. PharmEasy led with $193 million in debt, followed by Weaver Services at $170 million for its housing finance platform. Eruditus raised $150 million (debt), and Urban Company secured $97 million ahead of its IPO. Healthtech saw strong funding with Truemeds ($85 million) and Safe Security ($70 million), while conversational AI player Gupshup raised $60 million. Consumer brands Kapiva and The Sleep Company raised $60 million and $56 million respectively. Other notable deals included Amnex Technologies ($52 million), Recur Club ($50 million), CityMall ($47 million), Zepto ($46 million), IndiQube ($44 million pre-IPO), and Darwinbox ($40 million).

​​Top 15 early-stage deals

Despite the slowdown, investor interest remained robust in sectors like AI, healthtech, and e-commerce. In Q3, notable funding rounds included QpiAI raising $32 million for quantum computing and AI solutions, Composio securing $25 million for agentic AI, and TERN Group raising $24 million for its global talent mobility platform. Other significant deals were FirstClub and Emergent, each raising $23 million, and Arintra, which secured $21 million for its medical coding platform. 

Mergers and Acquisitions

In the September quarter, Indian startups saw significant acquisition activity across sectors like AI, Fintech, Healthtech, and FMCG. Key deals included Zoho Corp acquiring Asimov Robotics, Udaan taking over ShopKirana, Uniphore acquiring Orby AI, and Flipkart securing a majority stake in Pinkvilla. Fintech moves by Niyo, Partners Group, and PayU highlighted ongoing consolidation and growth in the startup ecosystem.

 City and segment-wise deals

In the September quarter,Bengaluru led with 128 deals worth $1.06 billion (37.9%), followed by Mumbai with 41 deals totaling $753.7 million (27.1%), and Delhi-NCR with 74 deals raising $530.4 million (19%). Hyderabad and Ahmedabad each saw 14 deals, raising $85.7 million (3.1%) and $162.3 million (5.8%) respectively. 

In terms of segment, Fintech led the pack with 34 deals raising $556.3 million (19.97%), followed by E-commerce with 53 deals worth $436.1 million (15.65%). Healthtech recorded 18 deals totaling $342.2 million (12.28%), while AI contributed 37 deals raising $277.1 million (9.95%). Deeptech saw 20 deals securing $63.8 million (2.29%).

Series-wise deals

In the September quarter, India’s startup ecosystem saw strong early-stage funding, with 41 Pre-seed deals raising $48.3 million and 102 Seed rounds totaling $179.2 million. Series A deals dominated with $536.1 million across 56 rounds, while Pre-Series A funding accounted for $86.6 million from 39 deals. Series B rounds remained active as well, with 19 deals securing $304.8 million.

​​Layoffs, shutdowns and departures

Following a period of slowdown, layoffs in Indian startups have spiked, with nine companies cutting nearly 2,000 jobs, largely from the gaming sector. The government’s crackdown through the new Gaming Law has intensified pressure, and more job cuts are expected in the near future.

On the shutdown front, multiple gaming firms have closed their real-money gaming verticals, while some non-gaming startups have also wound down operations due to a mix of challenges.

Meanwhile, the startup ecosystem experienced notable departures of top executives in Q3. According to data, 13 top-level executives, including CEOs, CBOs, CFOs, co-founders, managing directors, and presidents, have resigned. During the period, there were 79 key hirings. The full list can be accessed here.

Trends

Funding in farm to fork model: Funding in the farm-to-fork sector has grown despite past shutdowns. Handpickd raised $15 million and Kisan Konnect secured $8 million recently, providing a boost to the segment. However, startups like Otipy, Fraazo, and Deep Rooted shut operations after raising $49 million, $61 million, and $20 million respectively.

Timely exit: Swiggy has sold its stake in Rapido for a total of Rs 2,399.5 crore, with Rs 1,968 crore going to MIH Investments, a Prosus Group company, and Rs 431.5 crore to Setu AIF Trust and WestBridge, generating over a 2.5 times return on its investment made less than four years ago.

Debt on rise: Startups are increasingly choosing debt over equity to manage finances. PharmEasy raised $193 million to repay loans, Eruditus secured $150 million through refinancing, and other firms like Fibe, Navi, and Varthana also tapped debt funding. In total, debt funding represented 16% of the total fundraise in the September quarter.

Conclusion

The shutdown of startups that raised a combined $130 million in agri+food, or the jolt to the billion dollar gaming sector were just some of the notable blows during the quarter. Holding the market up is the stock market, where IPOs continue to find takers despite a mixed bag on the returns front. That has allowed pre-IPO rounds to bulk up funding numbers as well. An interesting sidelight that probably deserves deeper study is the backing for niche segments again, sometimes by founders/executives who have been there and missed out earlier. This is based on a more confidence in the ability to slice and dice audiences at a manageable cost , something that was considered too expensive just 5 years back. 

October will probably be a slow month after the September jump, but much like FIIs on the Indian market, foreign VCs might be playing it safe before fresh full fledged commitments to startups in India. Solving the logjam on the India-US trade deal will help of course. The market will also take its time to digest the  impact of US moves on other fronts like the H1B Visa or education, but beyond the obvious, look at founders that see opportunity in these situations as well. In India, if you have been a founder long enough, you know better than to complain about how the environment is not conducive for your business. Founders here realise that no one owes them a dollop of luck, easy policy or low cost customers. They have to make things happen to cross over into the holy land that is  institutional funding, and we remain hopeful that the current environment will only add resilience and enterprise to the operations of intrinsically strong models.