Domestic VC Funding Dips in Q3, But IPO Game Strong, Says KPMG Report
Despite the momentum propelled by robust exit markets and sustained focus on artificial intelligence, the domestic market has seen slower growth.
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[Image creative: Chetan Jha/MITSMR India]
Global venture capital (VC) investment rose from $112 billion in the second quarter of 2025 to $120 billion in the third quarter. However, according to KMPG’s latest report Venture Pulse Q3 2025, despite the momentum propelled by robust exit markets and sustained focus on artificial intelligence, the domestic market has seen slower growth.
VC funding in India slowed down in the third quarter of 2025 due to global geopolitical uncertainties and trade tensions with the US. Meanwhile, exit activity surged to a seven-year high.
“While interest in India remains high, VC investors have found it difficult to predict what might happen day-to-day, leading them to hold back from making any major funding decisions,” the report said.
The largest domestic deal was a consumer goods delivery focused company, Mitra’s $140 million, led by Bestvantage Investments.
Despite the soft investment done in Q3, optimism is being driven due to the growth in startup exit activity — particularly in terms of IPO exits. IPO saw strong momentum as compared to previous quarters, notably with Urban Company’s successful IPO on the Mumbai National Stock Exchange.
“VC investment results in India this quarter were driven by the speed bump that was the US tariffs, but people expect that to settle by the end of November. And macros are still strong, the capital markets still vibrant, and a lot of capital has been raised that will need to get deployed, so funding should increase as uncertainties calm. But investors are going to be focused heavily on the path to profitability and cash flows because without those, you won’t get a capital market exit,” said Nitish Poddar, partner and national leader, Private Equity, KPMG India.
On the Q4 ’25 outlook, KPMG hints that there is good optimism that VC investment will begin to rebound with more IPO activity expected over the next few quarters domestically.
