Recalibrated Investment Climate Prioritizes Profitability and IPO Readiness
India’s startup ecosystem is experiencing a renewed influx of capital, but with a markedly different investment philosophy than the frenzied funding era of 2021. Industry insiders and top dealmakers describe the current environment as a strategic recalibration rather than a broad-based resurgence. Capital is now being allocated more selectively, targeting startups that are financially disciplined, exhibit consistent profitability or near-profitability, and demonstrate clear intentions of going public. This resurgence in funding is exemplified by a surge in late-stage cheques, particularly in rounds exceeding $100 million. The investor mood, according to market participants, is driven by performance metrics and not just narratives, as it once was.
Companies like Groww, Zepto, Cred, Jumbotail, Dhan, and Porter are either preparing to raise or have recently secured funding rounds well above the $100 million mark. Similarly, other tech-focused startups including Darwinbox, Rapido, and Rebel Foods have successfully closed sizeable deals. These transactions are primarily backed by investors who had held back during market volatility and are now deploying dry powder towards a concentrated set of high-quality companies.
Highlights:
Focused capital is returning to profitable startups with IPO plans, not early-stage experiments.
Companies like Groww, Zepto, and Cred are preparing to raise over $100 million.
The current wave is characterized as a recalibration of quality over quantity in deal flow.
High-growth, unit-economics-driven companies are leading the funding resurgence.
Rise in Secondary Transactions Amid Strong Balance Sheets
With many of the leading startups now boasting solid financials and positive cash flows, the funding activity is increasingly tilted toward secondary transactions. This allows early-stage investors and employees to partially or fully exit without requiring founders to dilute further. These transactions also offer new investors a stake in companies on the cusp of going public, while founders retain control and equity. As per market observers, secondary-heavy deals are bridging the liquidity gap created by the subdued IPO pipeline.
Notably, Rebel Foods’ $210 million round in December was nearly 75% composed of secondary transactions. Zepto is reportedly in talks for a $250–300 million round largely comprised of secondary share sales, targeting increased domestic investor participation ahead of its planned listing. Similar pre-IPO secondary rounds are also being evaluated by Porter and Purplle.
Highlights:
Secondary share sales dominate late-stage deals, supporting early investor exits.
Founders retain equity as fresh capital isn’t always required due to healthy cash flows.
Pre-IPO secondary deals are increasingly common among profitable unicorns.
Rebel Foods and Zepto are leading examples of this trend.
Investors Prioritize Quality Amid Volatile Public Markets
Despite volatility in the public markets, late-stage capital remains abundant for high-performing private companies. Top-tier venture and growth equity firms are actively deploying capital from recently closed funds. Avendus Capital’s Managing Director Karan Sharma noted that investor attention is concentrated on startups with sound fundamentals, especially as several funds—Accel, Bessemer, Cornerstone Ventures, and Venturi Partners—have launched new funds in 2025 after a period of strategic pause.
Investment criteria have evolved sharply. Investors now prioritize sustainable business models, robust unit economics, and positive EBITDA over GMV growth or user acquisition metrics. “One common thread among all the companies raising large rounds right now is good financial metrics,” said Kashyap Chanchani, Managing Partner at The Rainmaker Group. “These firms have been performing better, on both profitability and growth, than what we have seen in the past.”
Highlights:
Several top VC firms have launched new funds, signaling capital readiness.
Only startups with strong profitability and operational metrics are being considered.
Growth equity is being deployed selectively, reflecting a more mature investment outlook.
IPO ambition, not just valuation hype, is driving funding momentum.
Valuations Undergo a Structural Reset Post-2021 Hype
One of the most critical shifts from the 2021–22 funding boom is the rationalization of startup valuations. Founders and investors alike are now operating under more grounded assumptions. This is evident in both primary and secondary rounds, where valuation multiples are now benchmarked to EBITDA and peer group financials. Sandeep Singhal of WestBridge Capital stated that just like in the public markets, where newly listed companies like Paytm, Nykaa, and Delhivery are trading below their IPO prices, private valuations have also adjusted significantly.
The average round size has come down as well. According to Avendus’ Sharma, most of the new growth rounds range from $70 million to $250 million, with the majority clustering in the $75–100 million band—far from the mega-deals of $300–700 million that dominated headlines during the 2021 capital rush.
Highlights:
Valuation multiples now align with profitability metrics like EBITDA.
2021-style overvaluation is largely gone from late-stage funding.
Round sizes have moderated, with $75–100 million emerging as the new normal.
Market corrections in public listings have influenced private market expectations.
Delayed IPOs Lead to Surge in Pre-IPO Funding Activity
With IPO markets showing intermittent volatility, many IPO-bound startups are opting to delay their listing timelines. Despite this, the capital flow hasn’t abated. Instead, startups are raising large secondary-heavy rounds to provide liquidity to early stakeholders and bolster balance sheets ahead of potential listings in 2026 or beyond. This trend is being driven by investor comfort with the startups’ current cash positions and their ability to time market entries more strategically.
Moneycontrol previously reported that more than 25 Indian startups were expected to go public in 2025, compared to just 13 in 2024. However, many of these timelines may now shift, with investors predicting a muted IPO pipeline this year due to global macroeconomic headwinds and valuation recalibrations.
Highlights:
Startup IPO timelines are being deferred amid market volatility.
Large secondary deals are stepping in to provide capital and investor exits.
Over 25 startups were originally planning IPOs in 2025, many may delay.
Public market readiness is being replaced by patient capital strategies.
Selective Optimism Among Investors Amid Global Uncertainty
Despite global economic uncertainties, investors remain optimistic about India’s late-stage private market, provided startups exhibit discipline, efficiency, and a clear path to public listing. The capital currently being deployed is more discerning, targeted at companies that have achieved a certain scale, product-market fit, and financial maturity. According to WestBridge’s Singhal, such companies are now on the radar of nearly all growth funds, many of which were inactive for the past 12–18 months.
This marks a shift from an era of abundance and hyper-growth to one where consistency, governance, and clear IPO timelines are valued above all. For the Indian startup ecosystem, this funding season represents not a return to frothy exuberance but a transition toward more institutional, outcome-driven financing models.
Highlights:
Global headwinds haven’t deterred capital from flowing into high-quality Indian startups.
Growth funds are focusing on companies with scale, profitability, and clear IPO intent.
The current funding trend rewards governance, not just growth potential.
Selective optimism and rational valuation mark the tone of 2025’s startup funding cycle.
