Even as venture capital flows into startups pick up, more than $10 billion in committed capital is still sitting on the sidelines. The paradox underscores a shift in investor behaviour rather than a funding slowdown. Investors, industry executives say, are becoming far more selective about where they deploy capital. Many prefer late-stage companies with visible traction, or are placing early bets at the pre-seed stage.
Meanwhile, emerging sectors such as artificial intelligence and deep tech are cornering a disproportionate share of fresh money. As Abhishek Prasad, managing partner, Cornerstone Ventures, says that while there are opportunities, strong business models remain central to their investment decisions.
What do industry execs say?
Industry executives point out that with foreign investors turning more conservative and domestic funds becoming more selective, competition for capital has intensified. Deal activity in 2026 has kicked off on a reasonably good note, in terms of funding, but investors are crowding into a handful of high-performing startups.
Around $2.6 billion has been invested between January 1 and February 19 compared with $2.2 billion in the same period of 2025.
However, the number of funding rounds, data from Tracxn shows, has fallen well below levels seen in the last five years. About 260 funding rounds were recorded between January 1 and February 19 this year, compared to more than 400 rounds during the same period in each of the past five years.
Aditya Singh on pre-seed rounds
Multiple funds are often seen investing in the same late-stage rounds, although there is an abundance of capital. At the same time, as an early-stage investor noted, there is activity at the pre-seed stage. “Pre-seed rounds are happening and closing,” said Aditya Singh, co-founder of All In Capital, adding that consumer brands, AI-led consumer platforms and deep tech ventures remain popular bets.
However, as companies move up the funding ladder, the bar has risen. The transition from Series A to later rounds has become particularly difficult, with investors demanding stronger proof of product-market fit, retention metrics and scalable business models. “While seed and Series A are largely narrative-driven, later-stage investors are looking at whether this company can realistically deliver a Rs 1,000-crore outcome,” Singh explained.
