India’s venture capital landscape demonstrated resilience and recovery in 2024, with funding rebounding to $13.7 billion, 1.4x the 2023 levels (Bain & Company).
Venture capitalists play a key role in powering India’s startup ecosystem.
However, many people still don’t know how venture capital funding in India really works.
Don’t worry, we’ve got you.
In this blog, you’ll discover:
If that sounds like something you’ve been curious about, let’s get started.
How Does Venture Capital Funding in India Work?
Venture capital (VC) is when investors give money to startups in exchange for equity (a share in the company).
That’s VC in one line.
Now, where does this money come from?
Usually, from:
- Institutional investors (like banks or pension funds)
- Corporations
- High-net-worth individuals
They all want to grow their wealth by backing the next big thing.
Let’s understand how venture capital funding in India works with an example.
Meet Priyanka and Rahul.
They’ve launched a clothing app that’s gaining attention and early traction.
The media is buzzing, and their customers love it.
They know their startup could become huge, but banks aren’t willing to lend them money because they consider it too risky.
That’s when David, a venture capitalist, enters the scene.
David sees potential in their business.
He studies their growth, reviews their business plan, and asks them the kind of questions you’ve probably heard on Shark Tank India, like:
- How much have you sold?
- What’s your customer acquisition cost?
- What’s your long-term vision?
David likes what he hears.
So, he decides to invest in their company and gets equity in return.
This is what VCs do: they invest in early-stage businesses they believe in, hoping these bets will pay off big time.
But here’s the catch: 3 out of every 4 startups fail.
That’s why VCs spread their investments across multiple startups.
The ones that succeed need to earn enough to cover the losses of the ones that don’t—and still deliver profit to the investors backing the VC fund.
The Stages of Venture Capital Funding
The amount of money a startup gets depends on how mature the business is.
Here’s how the stages generally work:
- Seed Funding: The first round is used to develop the idea and build the product.
- Series A: To refine the product and grow the customer base.
- Series B: To expand the team and scale operations.
- Series C & Beyond: To explore new markets, products, or international growth.
- Mezzanine/Pre-IPO: The final push before going public.
So let’s say Priyanka and Rahul stay in the game.
They raise funds across all stages, build a strong business, and finally decide to go for an IPO (Initial Public Offering).
They go public, and David, who backed them early, sees a significant return on his investment.
In the end, Venture capital is a high-risk, high-reward game.
It fuels innovation, helps bold ideas come to life, and drives the startup ecosystem forward.
The basic VC journey involves:
- Fundraising
- Finding promising startups
- Negotiating terms
- Investing
- Exiting (via IPOs, acquisitions, or secondaries)
And now, you know how venture capital funding in India really works.
Top Venture Capital Funds in India
Here are the top 3 venture capital firms in India that are actively backing exciting startups in 2025.
1. Accel India:
Accel is one of the most well-known VC firms in India.
They invest in early and growth-stage startups, especially in:
- Tech
- Fintech
- Consumer products.
In 2025, Accel launched a massive $650 million fund to invest in more Indian startups, even from smaller cities.
2. Kalaari Capital:
Kalaari backs early-stage startups, especially in:
- Tech
- Apps
- Digital products.
They’ve supported many rising businesses in India since 2006.
Nexus invests in both Indian and US-based startups, focusing on:
- SaaS
- Fintech
- AI-driven businesses.
They’re known for helping founders scale fast.
They recently funded Cognida.AI, an AI solutions company.
These firms are shaping the future of India’s startup scene.
How to Invest in Venture Capital Funds in India?
Venture capital isn’t a playground.
It’s a high-risk, high-stakes game.
And VCs do not just throw money to see what sticks, especially in today’s economy.
If you are building a startup, most VCs won’t look your way unless:
- You’ve got exceptional traction
- You’re a prodigy with serious proof-of-concept
- You’ve sustained operations for a significant amount of time
Why?
Because most early founders lack:
- Operational maturity
- Tested revenue models
- Proven supply chains.
And a VC’s job is to manage risk, not gamble.
However, if you’re not building a startup but want to invest in venture capital funds, here’s what you need to know:
1. Check if you’re eligible
To invest in VC funds, you usually need to be an accredited investor.
That means:
- A net worth of over ₹8.3 crore (around $1 million), excluding your primary home
- Or a high annual income (usually ₹2 crore+)
These rules are in place because VC is a risky space.
2. Know your risk profile:
Only invest a very small part of your total portfolio into VC funds.
These are high-risk, and most startups fail.
3. Do thorough due diligence:
Make sure you deeply understand:
- What the fund invests in
- Who’s managing it
- How their past investments have performed
4. Be aware of regulations:
If you’re an NRI or foreign investor:
- Make sure your investments follow FEMA guidelines
- India has proposed removing the Angel Tax, which could boost funding in startups
Where to begin?
If you meet the criteria, you can explore:
These platforms connect investors with startups and VC funds.
Most VC funds have a minimum investment starting from ₹25 lakh, so be prepared for that commitment.
Whether you’re hoping to raise VC money or invest in a fund yourself, remember: It’s not just about bold ideas.
It’s about clarity, consistency, and choosing wisely.
Conclusion
Venture capital funding in India is booming, and it’s only getting stronger.
As more startups emerge, the VC ecosystem is gaining trust, structure, and opportunities.
This means more chances for both startups to get funded and investors to be part of the action.
If you’ve got a solid business idea, a clear plan, and numbers to back it up, you’re already one step closer to attracting the right VCs.
And if you’re someone looking to grow your wealth, now you know how to invest in venture capital funds in India.
We hope this guide helped you better understand:
- How venture capital funding in India works
- The top venture capital funds in India
- What it takes to invest smartly in this space
All the best on your journey, whether you’re building the next big thing or backing it.
