What Stable U.S. and European VC Markets Signal for India

The venture capital world is increasingly polarised. Asia is struggling, with deal activity at decade lows, while the U.S. and Europe remain comparatively steady. According to KPMG’s Q2 2025 Venture Pulse report, the Americas attracted $72.7 billion across 3,425 deals, nearly 70% of global VC, while Europe saw $14.6 billion across 1,733 deals.

Together, the U.S. and Europe account for more than 85% of global venture investment, a dominance that shapes not just their own markets, but also how capital flows into emerging ecosystems like India.

This dominance by the U.S. and Europe markets cuts both ways. Being benchmarked against the West highlights gaps in scale, governance, and infrastructure. But it also gives India a clear blueprint to position itself as a credible alternative for global LPs seeking diversification and growth.

The Challenge: Competing With Scale and Depth

The U.S. and Europe have decades of venture infrastructure:

• Capital density: Pension funds, insurance companies, and endowments drive multi-billion-dollar venture allocations.
• Exit diversity: Deep IPO and M&A markets provide liquidity for investors.
• Frontier tech leadership: AI, defence, climate, and biotech companies in the West dominate global innovation pipelines.

This makes them not just the gravitational centres of global venture, but also the benchmark against which other markets are measured. When India is pitched to global LPs, it is inevitably compared to the U.S. and European ecosystems.

By contrast, India’s ecosystem is younger with fewer rounds and fewer scaled exits. For many Western LPs, India is still a growth story, but not a core allocation.

The Opportunity: A Credible Alternative in Asia

But this comparison presents a chance to stand out. Asia’s venture map has been redrawn in recent years as China’s once-dominant position has weakened under regulatory pressure and reduced foreign participation. That shift has created a vacuum. Investors seeking exposure to Asia’s growth story are increasingly turning their attention to India.

India’s strengths are coming into focus:

• Macro growth story: 6–7% GDP growth in an otherwise slowing world.
• Demographics: A young consumer base, rising affluence, and digital adoption.
• Policy tailwinds: Government reforms across startups, infrastructure, space, and renewable energy.
• Exit credibility: A functioning IPO market and growing secondary liquidity.

India’s venture market is still smaller than its Western counterparts, but its rapid growth, improving infrastructure, and widening sector base make it an increasingly strategic destination for global capital.

What Global LPs Expect

To translate attention into sustained allocation, India must meet the institutional expectations of global investors:

• Governance and transparency: Regular third-party audits, institutional-quality reporting, and global-standard IR practices.
• Capacity to absorb large cheques: Funds structured to handle bigger allocations and co-investment demands.
• Policy stability: Predictability in taxation, capital flows, and foreign investment rules.

Meeting these expectations is critical if India wants to move from a peripheral bet to a central allocation in global portfolios.

Learning From the Benchmark

Being measured against the U.S. and Europe provides India with a roadmap. India has a clear line of sight to the elements that draw global capital:

• Deep, patient institutional capital pools that underpin venture cycles in the West, driven by pensions, endowments, and sovereign wealth.
• Efficient and diverse exit markets, from IPOs to active secondary sales and M&A ecosystems, which recycle capital back into startups.
• Policy-supported frontier tech ecosystems where governments play a catalytic role.

India is already laying the foundations for similar depth: UPI and Aadhaar have created the rails for fintech; IN-SPACe is opening the space sector; PLI schemes are reshaping the manufacturing sector.

What remains is disciplined execution: scaling fund sizes without diluting quality, professionalising GP operations to meet institutional standards, and ensuring policy stability to lock in global confidence. If India can close these gaps, the comparison to the West shifts from a critique to a competitive advantage, proof that India knows exactly what it takes to become a core node in global venture capital flows.

The Strategic Moment

Global venture capital is reorganising. The U.S. and Europe remain dominant, but their stability is only part of the story: Asia is no longer defined by China’s gravitational pull, and capital is actively seeking its next centre of gravity. India is emerging as that contender owing to the structural shifts of the past decade: digital public infrastructure at population scale, a diversified startup pipeline, rising domestic consumption, and consistent government engagement in technology and capital markets.

This is a rare window. India doesn’t need to replicate Silicon Valley overnight; it needs to position itself as a market that can absorb institutional capital at scale while offering exposure to growth and innovation unavailable elsewhere. The country’s expanding venture pipeline, maturing GPs, and pro-innovation policies have created a foundation strong enough to attract long-term commitments.

If this trajectory holds, India won’t just be compared to U.S. and European ecosystems; it will stand alongside them as a third pole of global venture capital.