India's Startup Reset: From Governance Woes to Disciplined Growth The Bain India VC Report 2025 highlights a shift: venture funding jumped to USD 13.7 billion in 2024, a 1.4 times increase over the previous year, while deal volumes grew 45 per cent. Yet, nearly all of that growth came from small- and mid-ticket deals, with mega-rounds slowing sharply, a sign that investors are tightening standards.

India's startup ecosystem is maturing after a turbulent few years. Governance lapses, inflated valuations, and aggressive discount-driven growth once dominated headlines. Now, investors and founders alike are focusing on transparency, financial discipline, and sustainable exit routes.

The Bain India VC Report 2025 highlights a shift: venture funding jumped to USD 13.7 billion in 2024, a 1.4 times increase over the previous year, while deal volumes grew 45 per cent. Yet, nearly all of that growth came from small- and mid-ticket deals, with mega-rounds slowing sharply, a sign that investors are tightening standards.

At the recently concluded Asia PE-VC Summit 2025, Arpit Agarwal, Investment Partner at Blume Ventures, cautioned against exaggerating governance fears.

"It's not governance per se, it's about whether people can commit fraud and get away with it," he said. "Mistakes happen, but rarely. Mostly, these are ongoing procedural issues. The narrative often gets muddled quickly, and foreign investors may not understand the nuance, leading them to fear the market unnecessarily," said Agarwal as reported by DealStreetAsia.,

Pratip Mazumdar, Partner at Inflexor Ventures, noted that a lack of entry discipline and slow exits continue to weigh on returns. "It is the lack of valuation discipline at entry and missed opportunities to exit when conditions were favourable," he said.

Industry data backs him up: while Indian exits hit USD 11.6 billion in H1 2025, that was down 31 per cent from the second half of 2024, with deal counts falling nearly 40 per cent.

Mazumdar also said that India still remains under-allocated globally. Domestic investors, both institutional and retail, have driven public markets higher despite foreign capital outflows. "India has always looked expensive, but over a 5-15-year window, net dollar returns have been strong. Indian listed businesses are more expensive because they are highly capital efficient and deliver high ROA," said Mazumdar.

Visa Kannan, Managing Partner at Saison Capital, pointed out that success at smaller ticket sizes rarely translates to larger pools.

"Many managers aren't prepared for this shift but still raise larger funds, which can erode returns over time," she said. Looking ahead, she adds that discipline and differentiation will matter most: "Understanding emerging sectors, articulating why your fund exists, and how founders perceive you is crucial. Without that clarity, you may not be relevant, and competition needs to stabilise."

Agarwal also highlighted the ecosystem's overreliance on IPOs. "If you're looking to exit upwards of USD 100 million, IPOs seem like the only option. But that's not fair to entrepreneurs, as IPOs typically take 10 to 13 years. Exit planning is a muscle VC firms in India are still building. Some of us are better than others, but eventually everyone will get there," said Mazumdar.

Kannan said, "India is an expensive public market today, that's fair. But concerns about post-IPO performance are much ado about nothing." She stressed that retail investors must be educated about timing and risk, with regulators like SEBI focusing more on literacy than price guarantees, according to the report.