How India Fits Into a Global VC Market That’s Concentrating Bets

Venture capital has entered a new era. According to KPMG’s Q2 2025 Venture Pulse report, global deal activity fell to 7,356 transactions, the lowest in a decade. Yet total investment crossed $101 billion for the quarter. This paradox of fewer deals but comparable capital deployment signals a fundamental reordering of venture: capital is concentrating into fewer, larger, higher-quality opportunities.

The exuberant era of 2020–2021, defined by cheap capital, breakneck dealmaking, and thin diligence, has given way to a market where ticket sizes are rising even as deal counts shrink. Investors are writing larger cheques into companies with visible traction, defensible moats, and credible paths to profitability.

From Abundance to Selectivity

The last venture boom created a sense of near-limitless capital availability. Startups raised successive rounds at record valuations, and venture funds operated at speed, deploying large pools of capital with unprecedented velocity. LPs, too, embraced diversification, scattering capital across funds and managers in hopes of capturing the upside of a frothy market.

The landscape today is markedly different. Higher interest rates, tighter liquidity, and slower IPO markets have forced a shift in strategy. Venture capital is still flowing, but selectively. The average late-stage cheque size has risen sharply. Investors are backing fewer companies, but backing them harder.

It represents a structural shift in venture investing philosophy. The days of “spray and pray” capital deployment are over. Funds are taking fewer bets, but underwriting them with deeper diligence and more capital per company.

The Macro Context: Why Bigger Deals Make Sense

Venture’s concentration is not occurring in a vacuum. Three macro factors underpin the trend:

1. Capital supply remains abundant at the top end. Despite rising interest rates, large institutional investors are still allocating to venture, but they prefer writing fewer, larger cheques to managers who can handle institutional complexity.
2. Exit pathways favor scale. In a muted IPO market, late-stage companies with strong fundamentals are best positioned to list or attract strategic acquirers. Smaller, riskier bets are struggling to find liquidity.
3. Frontier sectors demand capital intensity. AI infrastructure, spacetech, semiconductors, and defence tech are capital-hungry fields. Building competitive moats in these industries often requires hundreds of millions upfront, naturally leading to larger rounds.

This confluence of abundant institutional capital, constrained liquidity, and capital-intensive sectors has created a venture market that prizes scale and staying power over speed and experimentation.

India in a Concentrating Global Market

India’s venture market reflects some of these same dynamics, though with its own flavor. Deal counts have moderated from their 2021 peaks, but larger growth rounds are still being executed in fintech, SaaS, and consumer sectors. Q2 2025 data shows India attracting $3.5 billion across 355 deals, up from $2.8 billion across 456 deals in Q1, highlighting fewer transactions but a larger total.

This is consistent with a broader trend: global venture capital is reweighting Asia allocations. With China’s venture activity at its lowest levels in over a decade, India has become a natural focal point for capital seeking growth exposure. The country’s scale, demographics, and improving policy environment give investors a destination for large, concentrated bets.

The sectors attracting this money are also shifting. While consumer internet and fintech remain staples, new focus areas, including AI, renewable energy, space, semiconductors, and mobility, are emerging. These sectors demand significant upfront investment. India’s growing ability to absorb these larger rounds is part of what sets it apart from other emerging ecosystems.

Implications for Venture Ecosystems

The rise of larger deals and concentrated allocations is reshaping venture ecosystems in several ways:

• Fewer but stronger companies: Startups that secure late-stage funding are often better capitalized and under greater scrutiny, leading to healthier unit economics and operational discipline.
• Higher barriers to entry: Capital concentration raises the bar for founders; credibility, technical depth, and traction are now prerequisites for raising meaningful funding.
• Evolving GP-LP relationships: Funds are increasingly judged not just on performance but on governance, reporting, and the ability to scale. LPs prefer to deepen relationships with fewer managers, which is changing fundraising dynamics.
• Sector bifurcation: Capital is flowing disproportionately to sectors seen as strategic or defensible, leaving some industries relatively underfunded.

This restructuring is creating a venture landscape that is more institutional and selective.

India’s Position in This Shift

India’s role in this new venture reality is significant. As Asia’s venture flows reorganize, India is emerging as the key beneficiary of capital rotation. Global LPs are recalibrating exposure, and India’s growing late-stage ecosystem, expanding digital infrastructure, and consistent policy direction make it an attractive bet.

The growth of India’s exit pathways, including IPOs and secondaries, has added liquidity, while regulatory reforms such as SEBI’s moves to strengthen fund structures and encourage institutional participation are laying groundwork for larger allocations.

This doesn’t mean India has reached parity with Western ecosystems, but it signals a rapidly growing market. India is increasingly becoming a destination for institutional-scale venture deployment.

The Bigger Picture: Venture Capital’s Maturity Moment

The shrinking deal count and rising cheque sizes of Q2 2025 are signs of venture capital entering a more mature, disciplined phase. Markets like the U.S. and Europe are leading the way, but India is aligning with this trend faster than most emerging economies.

Capital is increasingly concentrated in companies and funds that can demonstrate scale, governance, and defensibility. For startups, this creates higher expectations but also more stability: a fewer-number-but-stronger-companies model. For venture capitalists, it signals that relationships with LPs will hinge not just on returns but on operational credibility.

And for India, it underscores a pivotal reality: the country is being integrated into the global venture map as an investable ecosystem for large-scale, high-conviction bets, not just scattershot growth exposure.