New Delhi, Dec 29 (KNN) After two years of muted deal-making and flat funding levels in 2025, venture capital investors expect 2026 to usher in a steadier, though more selective, phase for India’s startup ecosystem.
A strong IPO market this year has unlocked liquidity for funds, encouraging investors to prepare for higher capital deployment next year, particularly into artificial intelligence (AI) and deeptech startups that demonstrate scale, revenues, and clear paths to profitability.
Shift Towards Fundamentals
Investors are moving away fr0m chasing headline Annual Recurring Revenue (ARR) milestones and high valuations, focusing instead on fundamentals such as retention, unit economics, and real customer demand, reported FE.
Aditya Singh, co-founder, All In Capital, noted that rapid early growth combined with inflated valuations in the past has constrained companies’ ability to raise follow-on capital when market sentiment changes.
AI and Deeptech Take Center Stage
AI is expected to dominate investment themes in 2026, with a shift towards enterprise-focused solutions that deliver structural productivity gains. Arjun Malhotra, partner, Good Capital, highlighted the opportunity for AI-led workflow automation for India’s large MSME base.
Beyond AI, deeptech sectors such as advanced manufacturing, robotics, and semiconductors will remain core focus areas, with founders increasingly tackling complex technological challenges.
Impact of IPO Liquidity on Funding
With nearly Rs 1.75 lakh crore raised through IPOs in 2025, early-stage investors now have the liquidity to reinvest in frontier tech startups. Deeptech startups raised about USD 1.2 billion in 2025, nearly 50 percent more than in 2024.
Investors caution that capital will remain scarce for undifferentiated consumer brands and capital-intensive models with weak unit economics.
Improved Exit Opportunities
Exit avenues, including secondaries, strategic mergers and acquisitions, and public markets, are expected to strengthen in 2026. Liquidity events over the past year are anticipated to influence investment decisions, with the over 100 IPOs in 2025 serving as a key turning point for venture-backed companies.
Government-led initiatives, including research and development frameworks and dedicated deeptech funds, are helping bridge the gap between lab research and venture capital.
(KNN Bureau)
