India’s recognised startup base crossed 2.5 lakh in October 2026, but funding conditions are becoming more selective, particularly for young companies. More than half of the recognised startups are located outside metropolitan cities, according to a report by Grant Thornton Bharat and the Indian Venture and Alternate Capital Association (IVCA).
The report said domestic venture fundraising doubled to $5.4 billion in 2025. At the same time, seed-stage funding fell by 37 per cent during the first nine months of 2026. The contrasting figures point to a market where capital continues to be available, but investors are applying greater scrutiny to early-stage businesses and the managers selecting them.
Specialist managers gain importance
Against this backdrop, the report said specialist venture fund managers could have a larger role in finding promising companies and generating stronger returns for investors, known as limited partners or LPs. It called for managers to build funds around a clearly defined, research-led investment thesis rather than relying only on broad exposure to the startup market.
The report identified several priorities for emerging managers:
- a clear investment strategy supported by research and independent conviction;
- fund sizes aligned with realistic exit opportunities;
- disciplined reserves for follow-on funding rounds;
- active support for portfolio companies as they expand; and
- early preparation for strategic sales, secondary transactions and initial public offerings.
These priorities are relevant to India’s wider startup geography. With over half of recognised startups based beyond metropolitan centres, specialist funds could help identify businesses in sectors and locations that may receive less attention from larger, generalist investors. For founders, the shift means that access to early capital is increasingly linked to a fund’s ability to understand a specific market and support a company beyond its first round.
“Emerging managers who build their investment thesis on rigorous research and independent conviction may face a tougher first fundraise, but they give themselves a better chance of succeeding over the long term. Before approaching LPs, managers should be able to demonstrate a clear investment strategy, differentiated sourcing and a pipeline of companies that fit the thesis,” said Amarjeet Makhija, Partner at Grant Thornton Bharat.
Call for a first-time manager pathway
The report also recommended a stronger support structure for new fund managers, including a dedicated pathway for first-time managers under the ₹10,000 crore Startup India Fund of Funds 2.0. Such a mechanism, it said, could help emerging managers develop into specialist funds and channel longer-term capital into India’s startup and innovation ecosystem.
| Indicator | Figure or period |
|---|---|
| Recognised startup base | More than 2.5 lakh in October 2026 |
| Domestic venture fundraising | $5.4 billion in 2025 |
| Seed-stage funding | Down 37 per cent in the first nine months of 2026 |
| Startup India Fund of Funds 2.0 | ₹10,000 crore |
Anisha Singh, Founder and Managing Partner of She Capital and Executive Committee Member and Co-Chair of IVCA’s Emerging Managers Council, said emerging managers are important for identifying new sectors, backing underserved opportunities and broadening the country’s startup ecosystem. The report’s recommendations place fund construction, portfolio support and exit planning at the centre of the next phase of India’s venture market, rather than treating fundraising alone as a measure of ecosystem growth.
