Indian startups secured $2.2 billion in funding during the third quarter of 2026, marking a 5% increase from the previous year, despite a 13% drop in the number of deals to 210. This shift reflects a more selective investment climate as investors focus on commercial viability amid macroeconomic challenges.
Four significant deals, each exceeding $100 million, were pivotal in driving this funding momentum. Notably, Emergent raised $130 million, while River secured $120 million. These transactions underscore a growing investor interest in sectors like AI and cleantech, which saw significant funding activity.
Growth stage startups, particularly those in Series A and B rounds, attracted the most attention, with funding at this stage rising 38% year-on-year to $1.1 billion across 90 deals. Meanwhile, late-stage funding saw a 10% decline to $994 million, indicating a cautious approach at the higher end of the investment spectrum.
AI startups dominated the sectoral funding landscape, raising $438 million across 35 deals, a 265% increase from the previous year. However, investor concerns over high valuations persist, with 63% of investors indicating discomfort with current levels. Cleantech also saw a significant rise, with $433 million raised across 23 deals, driven largely by electric vehicle startups.
Bengaluru emerged as the leading hub for startup funding, accounting for a significant portion of the total funding across 80 deals, a 157% increase year-on-year. The city’s dominance is attributed to large funding rounds by companies like Emergent and River, reinforcing its position as a key player in India’s startup ecosystem.
Despite the overall increase in funding, the number of active unique investors fell by 24% to 511, reflecting a more cautious investment environment. This trend is influenced by macroeconomic factors such as high inflation and weak equity markets, which have impacted capital deployment.
Investor exits were notable during the quarter, with 22 mergers and acquisitions recorded, a 69% increase from the previous year. Significant transactions included upGrad’s acquisition of Unacademy for $200 million and Imarticus Learning’s buyout of BELLS for $84 million. Additionally, six new-age tech companies made their public market debuts, offering lucrative exit opportunities for early investors.
Looking ahead, Bengaluru is expected to continue leading India’s deeptech ecosystem, with more than half of surveyed investors identifying it as the most promising hub by 2030. However, Chennai and Hyderabad are also gaining traction, backed by 25% and 20% of investors, respectively.
