Karnataka’s tech startup ecosystem witnessed a 30% decline in funding during the first half of 2025, raising $1.7 billion, compared to $2.4 billion in H2 2024. This trend echoes a broader slowdown across India’s venture landscape.
Funding Breakdown by Stage
- Seed stage: $141 million in H1 2025, down 39% from H2 2024 and 41% from H1 2024
- Early‑stage: $611 million, a 15% rise quarter‑on‑quarter, but still ~3% lower year‑on‑year
- Late‑stage: $930 million, falling 44% from H2 2024 and 56% from H1 2024
Q1 Snapshot: Continued Slowdown
In Q1 2025 alone, startups in Karnataka raised $633 million—a 23% drop from Q4 2024 ($825.5 million) and a steep 46% decline from Q1 2024 ($1.20 billion)
Seed funding reached only $57.3 million, down 14% from the previous quarter and 55% year‑over‑year. Early‑stage rose modestly to $294 million—a 34% QoQ rise, yet 14% below last year’s Q1. Late‑stage fell sharply to $282 million, down 48% QoQ and 60% YoY. Notably, Q1 2025 saw no $100 million+ rounds or unicorns, compared to two unicorns in Q1 2024. M&A activity, however, jumped with 21 acquisitions—a 91% increase over Q4 2024 and Q1 2024 YourStory
Sectoral Trends and Highlights
Despite the overall dip, fintech remained resilient, raising approximately $701 million in H1—up 255% from H2 2024 and 57% over H1 2024. Enterprise applications secured $619 million (a slight YoY rise), while retail startups collected $542 million—27% higher than H2 2024 but almost half of H1 2024 funding
Bengaluru Still Leads
Bengaluru accounted for nearly all the ecosystem’s funding—over 99%—reinforcing its status as Karnataka’s tech capital. Hubli and other cities remained minor contributors
Investor Activity and Commentary
Key investors in the ecosystem included Accel, AngelList, and LetsVenture. At the seed level, 100X.VC, Venture Catalysts, and Antler were the most active. Accel, Alteria Capital, and Peak XV led early‑stage rounds, while Think Investments, M&G, and Mars Growth Capital dominated at the growth stage
Despite the funding slump, some VCs see opportunity in early‑stage deals. According to Ninad Karpe of 100X.VC, pitch pipelines remain strong. Venture Catalysts’ Dr. Apoorva Ranjan Sharma commented that Karnataka continues to attract sustained investor interest due to its innovation capacity and talent depth
Key Facts at a Glance
| Metric | H1 2025 | Change vs H2 2024 | Change vs H1 2024 |
|---|---|---|---|
| Total Funding | $1.7 billion | −30% | −44% |
| Seed Funding | $141 million | −39% | −41% |
| Early‑Stage Funding | $611 million | +15% Wow (−3% YoY) | −3% |
| Late‑Stage Funding | $930 million | −44% | −56% |
| Unicorns or $100M+ Deals | None | — | — |
Why It Matters
This sharp decline in Karnataka funding reflects broader investor caution across India as macroeconomic headwinds, post-pandemic valuation corrections, and fund deployment slowdowns take hold. Bengaluru, however, remains the heart of the ecosystem, and resilient sectors like fintech and enterprise tech are driving the limited growth. The absence of large rounds and unicorn creation marks a departure from previous funding cycles.
Looking Ahead
While funding activity has cooled, industry experts believe this presents an opportunity for more sustainable startup building. Continued activity at the seed and early stages—combined with ongoing M&A—suggests a shifting focus towards long-term viability and profitability over growth at any cost.
