Bengaluru: Seed funding for startups has held up better than the overall financing since the 2021 boom cooled. But Nishit Garg, a partner at global venture capital (VC) firm RTP Global, says the real bottleneck has shifted to the next phase. The reason: artificial intelligence (AI) has shrunk timelines, but it is taking longer to win customers.
“I don’t think the seed stage is in bad shape today,” Garg said. “After 2023 second half, things started recovering. And today there is a lot of seed activity.” The bigger problem, he said, is that “companies maturing from early stage (Series A and B) and beyond–that has gone slower”.
While overall startup funding in India has stayed well below the 2021 peak, seed and early-stage funding have been relatively more stable in recent years. According to Tracxn, seed-stage funding fell from its 2021-22 peak of $2 billion in 2021 and $2.2 billion in 2022 to $1.4 billion in 2023, before recovering to $1.5 billion in 2024. It then slipped again to $1.1 billion in 2025.
Early-stage funding, which includes Series A and Series B rounds, also fell sharply from $7.5 billion in 2021 and $6.6 billion in 2022 to $3.5 billion in 2023, but recovered gradually to $3.7 billion in 2024 and $3.9 billion in 2025.
is the first official equity financing to prove the business model. A and B rounds are typically used to fund initial growth once the business model is proven.
That gap is becoming more visible as startups build products faster, helped in part by artificial intelligence (AI) tools and lower development timelines, but still take longer to win customers and scale go-to-market. Garg said this is making it harder for many companies to raise larger follow-on rounds, even when early-stage funding remains available.
Late-stage funding, however, tells a very different story. After surging to $29.3 billion in 2021 and staying elevated at $15.6 billion in 2022, it fell to $6 billion in 2023, recovered to $7.5 billion in 2024, and slipped again to $5.5 billion in 2025, according to Tracxn. That remains lower not just than the funding-boom years of 2021 and 2022, but also below the $7.7 billion raised in 2020, before the market entered its most overheated phase.
Measured pace
One lesson from the 2021-22 funding cycle, Garg said, is that not every large market fits venture capital’s return expectations. He pointed to categories such as business-to-business (B2B) commerce, where investors now better understand the heavy role of financing and working capital; and pure lending models, where tighter regulation has made the path to rapid growth less straightforward.
RTP Global is also keeping a measured pace of investing in India. Garg said the firm typically does 6-8 deals a year, which can go up to 10-12 in a strong year and fall to 3-4 when opportunities are limited. The fund is staying cautious amid uncertainty around geopolitics, oil prices, public markets and the flow of private capital, he said.
Despite caution, AI remains one of the few areas still drawing steady investor attention in India. India’s is widening beyond copilots and chatbots into areas such as infrastructure software, data centres, semiconductors and enterprise workflows. According to Tracxn’s data, AI startups in India raised around $643 million across 100 deals in 2025, up 4.1% coampred to 2024, with most of the capital flowing into early and early-growth stages.
For RTP Global, that means being selective about what counts as a real moat. Garg said the firm rejects startups that are essentially “just prompt architecture over some LLMs” because those are easy to replicate, and also avoids companies building into areas already on hyperscaler roadmaps. Instead, RTP is looking for sharper problem statements and defensible advantages, whether in infrastructure or product depth.
Oversupply, but no AI bubble
Garg does not see India’s AI seed market as a bubble, but sees “oversupply in the seed stage”.
“Our broad thesis is that Indian AI startups that want to become very large will need global customers, US market access, and eventually backing from global funds, because India-only monetisation is still too weak to produce very large outcomes,” he said.
Founded in 2000, RTP Global has more than $3 billion in assets under management through investments in over 150 companies globally, including in the US, EU and Asia. In India, the firm has made over 50 investments.
Some of its earliest notable bets in the country include Cred, Rebel Foods, DeHaat, Classplus and GoKwik. More recently, the firm has led or co-led rounds in startups such as Wiom, Stable Money and FirstClub.
It is currently investing from its fourth global fund, its largest at about $1 billion, raised last year. Its two previous funds, about $650 million and $220 million, were also invested in India. Half of the latest fund is meant for early-stage investments, while the rest will be used to double down on breakout portfolio companies, Garg said.
On how RTP expects unrealised value to be unlocked, Garg said India’s more vibrant IPO market over the past four years has made public listings an increasingly logical route for partial exits by venture investors.
“ is definitely a very logical partial exit outcome for a lot of investors,” he said. But companies that are not breakout winners may be better suited to M&A, family-office secondaries or other liquidity options, he said.