India emerges as bright spot in rising venture capital investment

• Witnesses a rise in VC funding to $3.5b across 355 deals, a substantial increase from $2.8b in the previous quarter, despite a reduction in the number of deals from 456.

India experienced a robust increase in venture capital investment, underscoring its emergent role in the regional and global startup ecosystem amidst a challenging macroeconomic environment.

In Q2 2025, India witnessed a rise in VC funding to $3.5 billion across 355 deals, a substantial increase from $2.8 billion in the previous quarter, despite a reduction in the number of deals from 456, according to KPMG ‘Venture Pulse Q2 2025’ report.

The disparity between deal count and investment value suggests a growing emphasis on larger, more substantial funding rounds, reflecting investor confidence in the quality and scalability of Indian startups.

Fintech emerged as a dominant sector attracting significant capital, alongside health-tech and logistics, sectors that collectively exemplify India’s innovation potential and resilience amid global uncertainties.

Strong investor interest

As Nitish Poddar, KPMG India’s Partner and National Leader for Private Equity, noted, the strong investor interest across these domains highlights an optimistic outlook for the country’s technology-driven industries.

Globally, however, VC investment showed a contrasting trend. Total global VC funding declined from $128.4 billion in Q1 2025 to $101.05 billion in Q2 2025, indicative of the persisting geopolitical conflicts, trade tensions, and economic uncertainties that have dampened investor enthusiasm worldwide.

Nevertheless, the quarter remained relatively strong, marked by a strategic focus on large-scale investment opportunities, particularly in cutting-edge areas such as artificial intelligence (AI) and defence technology.

US rules the roost

The United States continues to dominate global VC investments, attracting nearly 70 per cent of global funding in Q2 2025, particularly in the AI sector where deals exceeded $1 billion.

The concentration of capital in AI, defence tech, and space tech underscores investor prioritization of high-technology sectors poised for long-term growth and strategic significance.

Moreover, defence-tech-focused AI companies raised funds not only in the US but also in other regions, signaling a widespread global interest in advanced technology with defence applications.

In Europe, VC investment demonstrated relative stability, with a slight decline from $16.3 billion in Q1 2025 to $14.6 billion in Q2 2025, coupled with a notable drop in deal volume.

This pattern reflects a strategic shift among investors toward larger and later-stage deals, consistent with broader global trends prioritising scale and maturity over volume.

Conversely, VC investment in Asia outside India remained subdued, experiencing only a marginal increase from $12.6 billion to $12.8 billion, while deal volume fell significantly.

The decline suggests continued caution among investors in many Asian markets, possibly due to geopolitical and economic uncertainties, affecting overall investor confidence and deal flow.