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Tata Capital > Blog > Venture capital market in India: From strength to strength

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Venture capital market in India: From strength to strength

Venture capital market in India: From strength to strength

In pre-liberalization India, government initiatives were particularly crucial to the country’s economic growth. By the late 80s, the Indian government recognized the importance of venture capital and private equity for small businesses. Early venture capital examples include public banks providing early-stage funds to the likes of ICICI, while the Technology Development and Information Company of India (TDICI) funded tech-driven Indian companies.

In 2024, the venture capital market in India saw a 1.4X annual increase, bringing in over $13.7 billion in funds. India has now strengthened its position as the second most-favored destination in APAC (Asia-Pacific) for venture capitalists. Five unicorns rose in India in 2024, compared to only two in 2023.

Early progress of venture capital in India

Several private equity firms entered India in the 90s, buoyed by the stir caused by public sector and TDICI (Technology Development and Information Company of India Limited) interests. By the early 2000s, the dot-com boom touched the Indian venture capital landscape. Major international venture capitalists funded Indian internet-based companies. Global giants such as Warburg Pincus struck a deal with the then-upcoming Indian telecom company, Bharti Airtel.

The first decade of this century also saw the rise of venture capital firms in India, such as Sequoia Capital and Nexus Ventures. These firms were instrumental in the growth of Indian start-ups such as Ola, Zomato, and Flipkart.

Soon, a fresh wave of international venture capital firms, such as Tiger Global, SoftBank, and Accel Partners, made their presence felt in India. By the middle of the previous decade, unicorns sprang up across India. The success of start-ups like Byju’s and Oyo ensured that billions of dollars continue to pour into India.

Recent surge in activities

In the post-COVID world, the Indian venture capital landscape saw a slowdown in 2023. However, Bain’s India Venture Capital Report 2025 suggests that the market has seen a bounce back in 2024. Deal activity has increased from 880 in 2023 to 1,270 in 2024, indicating a 45% YoY growth.

Much of the investment, nearly 95%, was in small and mid-size deals. These funds support small and medium businesses that eventually prove vital to the venture capital growth story. $50 million plus deals nearly doubled in 2024, indicating investor confidence in mature business opportunities. This growth has been against the backdrop of a flat APAC venture capital landscape, thus reiterating India’s strong position as an investment destination.

Overall, the large deals during the year rebounded to pre-COVID levels, with recognized names such as Lenskart, Zepto, and Meesho attracting investments.

Tech takes the cake

Tech-driven companies have proven to be the forerunners in terms of venture capital interests. Sectors like consumer tech, software, SaaS, and fintech accounted for 60% of the year’s deal volume. Consumer tech, in particular, saw a sectoral investment growth of 2.3X. Within this sector, areas like B2C commerce, travel tech, gaming, and edtech shone. Quick commerce proved to be the breakout theme among investors, while funding in generative AI also rose impressively.

Among traditional sectors, banking, financial services, and insurance cracked impressive deals, backed by the huge domestic market and its untapped demand. While there was a 3.5X growth in deals, healthcare saw a 1.2X growth, and other traditional sectors had a 2.7X increase.

Amid the year-long growth, exit activities amounted to $6.8 billion. Notably, healthy and timely exits are crucial for a healthy venture capital ecosystem. Public market exits amounted to 76% of the total exit value.

Regulatory ease

It is worth noting that venture capital companies in India have benefited from regulatory tailwinds in recent years.

  • Union Budget 2024-25 abolished the angel tax for all investor classes. Coming into effect on 1st April, 2025, this was an encouraging policy move for investors.
  • The long-term capital gain tax saw a reduction as a uniform rate of 12.5% became applicable.
  • The introduction of the SWAGAT-FI (Single Window Automatic & Generalized Access for Trusted Foreign Investors) framework will simplify Foreign Venture Capital Investor (FVCI) registration from 1st June, 2026.
  • Similarly, the simplification of the National Company Law Tribunal (NCLT) procedures aims to reduce delays in corporate restructuring, mergers, and insolvency proceedings. For VC firms, it will improve investment efficiency, answer liquidity concerns, and streamline exits.

Final thoughts

To summarize, India’s venture capital market is poised to consolidate its recovery and reach a more mature stage. Higher deal activity and investor participation, combined with structural and regulatory reforms, can open up strong and resilient days for the Indian venture capital ecosystem.

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FAQs

What are the different types of venture capital funding?

Venture capital can be in the form of early funding like seed capital and early-stage capital, expansion and growth capital, late-stage/pre-IPO funding, and mezzanine funding to bridge specific fund gaps.

How are venture capitalists categorized?

Generally, venture capital can be in the form of angel investors, financial firms, and corporates. Angel investors can be HNIs/UHNIs who invest in early stages. Financial firms like Accel and Sequoia are professionally managed venture capital firms. Corporate VCs are large corporations that invest in start-ups as part of strategic policy decisions.

How to become a venture capitalist in India?

A venture capital firm must apply to SEBI in Form A along with the necessary documents to get registered as a Venture Capital Fund under SEBI (Venture Capital Funds) Regulations, 1996.
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