Explained: India’s Startup Ecosystem 2025

In India
October 24, 2025
Parminder Kaur
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India’s startup revolution is entering a new, more disciplined phase. By October 2025, over 1.9 lakh DPIIT-recognised startups were active nationwide, creating 16.6 lakh jobs and transforming local economies. Despite a global funding slowdown, the country still ranks third worldwide for tech-startup investment.

Recent policy actions — including MoUs with Kotak Mahindra Bank and Primus Partners, the Credit Guarantee Scheme fee cut, and a ₹10,000 crore expansion of the Fund of Funds for Startups — are helping founders access capital and mentorship.

As India’s innovation hubs spread beyond Bengaluru and Delhi-NCR into Tier-2 and Tier-3 cities, the focus is shifting from valuation to value-driven sustainability. ABC Live’s analysis shows how government policy, digital infrastructure, and investor discipline are positioning India’s startup ecosystem for its next stage of inclusive, steady growth.

New Delhi (ABC Live): By 2025, the country will have emerged as the world’s third-largest startup hub after the United States and China, both in funding and unicorn numbers.
According to the Department for Promotion of Industry and Internal Trade (DPIIT), recognised startups increased from 1.59 lakh (January 2025) to 1.81 lakh (July 2025) and are expected to exceed 1.9 lakh by October 2025.

Although funding growth slowed compared with 2024, India still ranked third globally in H1 and 9M 2025 for tech-startup investments.
Meanwhile, several recent measures — including MoUs with Kotak Mahindra Bank and Primus Partners and reduced fees under the Credit Guarantee Scheme for Startups (CGSS) — aim to make credit easier and mentoring stronger.
Together, these steps reflect how India is turning policy intent into measurable startup progress.

Size and Employment Impact

From only 500 recognised startups in 2016, the ecosystem has expanded dramatically, crossing 1.8 lakh by mid-2025.
DPIIT data shows that more than 16.6 lakh jobs have been created by October 2024.
While Bengaluru, Delhi-NCR, and Mumbai remain leading centres, new startup clusters in Tier-2 and Tier-3 cities such as Indore, Kochi, and Jaipur are gaining visibility.
As a result, entrepreneurship has become more balanced across the country.

Funding Landscape and Valuations

During the first half of 2025, startups raised USD 4.8–5.7 billion, depending on the source.
In total, USD 7.7 billion was raised during the first nine months of the year. Even with this moderation, India held the third global position in startup funding.

Major sectors such as transportation, retail, and enterprise technology led this trend.
B2C e-commerce firms alone brought in around USD 1.3 billion.
Despite tighter liquidity, investor confidence remained firm because business models became more disciplined and sustainable.

Policy and Institutional Support

Government policies continue to provide the backbone of the ecosystem.
The Startup India initiative offers recognition, tax benefits, and legal clarity.
Under the Fund of Funds for Startups (FFS), managed by SIDBI, ₹10,000 crore has been channelled through SEBI-registered AIFs, and the 2025 Union Budget proposed another ₹10,000 crore to strengthen early-stage finance.

In addition, the CGSS ensures collateral-free loans and recently lowered its annual guarantee fee to 1% for 27 champion sectors.
Likewise, MoUs signed on October 23, 2025, with Kotak Mahindra Bank and Primus Partners launched API-based banking, mentoring, and scale-up programs.
Hence, India’s policy framework is becoming more founder-friendly and financially inclusive.

Capital Stack

At present, AIF-led FFS commitments continue to reduce risks for venture capital, while CGSS cuts credit costs for new businesses.
Moreover, state-backed incubators are growing rapidly and helping early-stage entrepreneurs.
However, the seed and late-stage funding environments remain selective, and many investors now prefer slower but more secure funding rounds.
Therefore, startups are focusing on operational efficiency instead of fast but risky expansion.

High-Growth Sectors (2025–27)

Several sectors show strong future potential:

Climate Tech & Energy Transition: The DPIIT–GEAPP partnership provides mentorship and funding for scalable clean solutions.
Transportation & Logistics: Asset-light, tech-driven logistics are expanding again after a brief slowdown.
B2C E-Commerce: While investors are cautious, a shift toward profitability and omnichannel growth is visible.
Enterprise SaaS & AI: Software exports priced in USD and AI-driven tools in finance and health remain hot areas.

Overall, India’s innovation base is broad and increasingly aligned with global sustainability goals.

State-Level Dynamics

Beyond the major metro hubs, states have begun to build their own startup stories.
For instance, Uttar Pradesh reports 17,000 startups and 8 unicorns as of 2025.
Similarly, Kerala, Haryana, and Gujarat are investing heavily in incubators and university-linked accelerators.
This decentralised growth is transforming entrepreneurship into a truly nationwide movement.

Talent, Compliance, and Infrastructure

The availability of skilled technical and business talent remains India’s biggest strength.
In addition, salary levels have stabilised, enabling startups to hire competitively again.

To enjoy benefits, a company must still meet Startup India’s recognition rules—covering factors such as entity type, turnover, and innovation.
On the infrastructure side, digital public platforms like UPI, ONDC, and Account Aggregator have improved market access and lowered costs.
Consequently, starting and scaling a business is now simpler than ever before.

Risks and Frictions

Even with progress, funding gaps continue.
Early-seed and late-growth stages remain constrained, creating a “barbell” funding structure.
At the same time, investors emphasise profitability over valuation.
Another persistent challenge is delayed payments from large buyers and slow rollout of credit schemes.
To maintain growth, smoother execution and faster fund release are essential.

Outlook 2026

Looking ahead, the picture appears cautiously positive.
Funding could remain flat or slightly higher as global interest rates begin to ease.
Instead of IPOs, more M&A and secondary exits are expected.
If the new Fund of Funds becomes operational and CGSS coverage broadens, early-stage startups may regain funding momentum by late 2026.
Thus, 2026 is likely to mark a phase of consolidation rather than correction.

Recommendations

For Founders

Secure DPIIT recognition early and apply for CGSS or Kotak–DPIIT banking benefits.
Focus on cash efficiency and shorter payback periods.
Build from Tier-2 and Tier-3 cities to reduce costs and boost retention.

For Investors

Co-invest with SIDBI-backed AIFs to limit risk.
Target climate-tech and logistics where demand meets policy incentives.
Use secondary sales and earn-outs for reliable liquidity.

For Policymakers

Fast-track FFS and CGSS disbursals.
Enforce timely receivable payments through TReDS and UPI Autopay.
Publish monthly DPIIT dashboards to keep data transparent and up to date.

Conclusion

The story of India’s startups in 2025 is one of maturity and balance.
Thanks to proactive policy, digital infrastructure, and skilled talent, the ecosystem remains resilient despite global headwinds.
As the focus shifts from valuation to value, the coming years promise steadier, broader, and more inclusive growth.