What Q2 2025 Global Venture Trends Mean for India

The second quarter of 2025 looked weaker at first glance, with global venture funding falling from $128.4 billion in Q1 to $101.05 billion in Q2. But much of that decline was due to Q1’s one-off OpenAI mega-round. Strip that out, and VC activity held steady, even resilient, despite geopolitical tensions, slower dealmaking, and shifting interest rate expectations.

But for Indian investors, whether institutions, family offices, or HNIs, the real insight is not just the global headline number, but what it means for capital deployment and strategy at home.

A Market That’s Shrinking in Volume But Not in Conviction

Deal counts globally fell to a decade low of 7,356 in Q2, down from 9,314 in Q1. But the decline in volume hasn’t meant a collapse in value. The highest-quality opportunities, particularly in areas like AI, defence technology, and fintech, still attracted multi-billion-dollar rounds, underscoring that capital is consolidating around conviction.

For India, this “fewer but bigger” trend carries an important signal: global LPs are concentrating their bets, and when they look to India, they will be more selective. The implication for Indian companies and investors is clear; the bar for quality, governance, and clarity of business model will only rise.

India’s Position in a Soft Asian Quarter

Asia as a region posted its second lowest quarter of investment seen in over a decade with $12.8 billion across 2,022 deals. Much of this was driven by a sharp slowdown in China, where capital flows remain restricted and exit routes uncertain.

India, while not immune to slower deal counts, still stands out for:

• A healthier pipeline — aided by domestic consumption and structural growth sectors like healthtech, fintech, SaaS, and EVs.
• Stronger policy tailwinds — from startup-friendly FDI rules to space and semiconductor incentives.

The implication? India could benefit disproportionately from any reallocation of Asian capital away from China but only if local managers can absorb larger cheques and meet institutional LP governance standards.

The Americas and Europe Are Still Pulling Ahead

The U.S. remained the gravitational centre of venture capital with $70 billion across 3,073 deals in Q2. Europe, though smaller, held steady at $14.6 billion across 1,733 deals.

For Indian investors and fund managers, these markets matter in two ways:

• Outbound: Allocations to U.S. and European funds offer exposure to frontier sectors such as AI, climate, and defense, where India has growing activity but fewer scaled players.
• Inbound: When LPs in the U.S. and Europe see their home markets remain stable, they retain capacity to look abroad. That matters for India, which increasingly fits into an “Asia ex-China” allocation thesis.

A fund manager raising from both domestic and overseas LPs now has the advantage of pitching India as both a growth market and a diversification hedge.

Sectoral Signals That Matter for India

AI and Deep Tech

Global AI investment remains intense. India is beginning to see more AI-native startups (SaaS AI, AI infra, generative AI in local languages), but the biggest Indian play right now may be providing AI infrastructure and talent to global companies. For investors, co-investing in cross-border AI plays could be a way to bridge domestic capability with global scale.

Defence and Spacetech

Defence tech is attracting unprecedented VC attention in the West. India’s opening of its defense procurement to private players, plus the growth of spacetech startups like Agnikul and Skyroot makes this a sector to watch. These aren’t high-volume deal sectors yet in India, but they have the potential for outsized investment opportunities as the sector continues to grow.

Fintech

The resilience of fintech in global markets is mirrored in India’s own funding activity, especially in lending tech, B2B payments, and infrastructure rails. The key for Indian investors is distinguishing between fintechs that can survive in a high-compliance, cost-of-capital environment and those still chasing unsustainable growth.

The Exit Question

The KPMG report notes that global exit activity remains sluggish, but not frozen. IPOs in Q2, while fewer than in peak years, still brought meaningful liquidity in certain sectors.

For India, this has two implications:

• Late-stage investors should calibrate holding periods and valuations with realistic exit horizons, not over-optimistic IPO timelines.
• SEBI’s continued work on listing norms for pre-profit and tech-heavy companies could accelerate domestic IPO pathways if paired with capital market depth.

Allocation Signals Emerging in Q2

Q2 activity shows patterns in how capital is moving:

Concentration of capital
Fundraising has skewed toward managers with deep sector expertise, operational experience, and exit track records. Cheque sizes are larger and appear more deliberate than in previous cycles.

Sectors attracting outsized attention
Investment flows and conversations have centered on AI infrastructure, spacetech, renewables, fintech infrastructure, and healthcare technology, areas benefiting from both policy support and global momentum.

Why This Quarter Matters

Q2 2025 might not go down as a blockbuster quarter for global VC, but it’s a pivotal one for capital allocation clarity. The froth is gone. The high-quality deals are still being done, often faster than before, and investors are rewarding companies with clear unit economics, scalable markets, and defensible moats.

The message is simple:

• The global market is in a consolidation phase.
• India’s relative resilience within Asia is an advantage.
• Domestic and overseas opportunities now require sharper filters.

If we get this right, the next global upcycle could see India not just as a beneficiary of redirected capital, but as a central node in the venture capital network.