India’s AI startup boom once saw angel investors racing to grab early equity in anything involving AI in its pitch deck. However, come 2025, the euphoria seems to be cooling. Funding rounds have thinned, seed-stage cheques are drying up, and angel investors are keeping their powder dry.
While investors such as AngelList, Accel and Venture Catalysts have been active with multiple portfolio companies, the number of active angel investors has decreased compared to previous years. Notably, there are significantly fewer new deals reported in 2025, according to data from Traxcn.
Most investments are concentrated in the Seed and Series A stages, with some angel investors contributing at the Seed stage. Moreover, the significant number of Seed investments suggests that early-stage AI startups continue to generate interest. Yet, the sheer volume of angel investments remains relatively lower.
Funding Momentum Grows, But With Caution
The landscape of angel investing in India has just hit a notable $1 billion in commitments, but there are concerning signs that this fledgling asset class might be at risk, the Economic Times reported. The surge in regulatory oversight may play a crucial role in this concern. Throughout last year, there has been an impressive 44% growth in commitments to angel funds and a 33% rise in investments.
While these statistics reflect positive growth, the SEBI seems eager to further enhance the conditions for business operations. While this is an encouraging direction, it’s crucial to exercise caution.
Speaking about his experience, Arpit Mittal, founder and CEO of edtech startup SpeakX, told AIM, “What we see isn’t a mass exit; it’s more like angels putting their foot on the brake. 2024-25 rules from SEBI now ask angels to prove higher net-worth and go through extra accreditation.”
“Many casual angels don’t want that paperwork, so they have paused investing, while the seasoned folks are simply cutting ticket sizes from ₹1-2 crore to ₹50-75 lakh per deal,” he added.
As the culture of risk-taking begins to grow beyond established business families, creating fresh funding sources remains crucial. In case angel funds were to vanish due to investors’ reluctance to seek accreditation, many talented entrepreneurs may not even make it to the doorstep of venture capital or private equity.
The contrast with 2021-22 is stark, when the country saw a spike in AI optimism post-COVID-19, fuelled by generative AI breakthroughs and Silicon Valley’s bullishness. Cut to 2025, that optimism has morphed into a cautious wait-and-watch strategy in India.
The number of funding rounds peaked at 53 in 2021. However, a notable decline is expected in 2025, with only $94.8 million raised from 13 rounds as of July 30. Moreover, the count of active angel investors appears to be decreasing compared to previous years, especially with fewer new deals reported for this year.
Ankita Vashistha, managing partner at Arise Ventures, believes that the current landscape seems to be somewhat specific to India. Many Indian startups tend to focus on building applications rather than foundational AI technologies, highlighting a need for deeper innovation in the sector. While there is excitement and investment in AI, there’s also a trend of ‘AI washing’ similar to greenwashing, she added.
She asserted that while it’s important not to generalise, there’s a clear difference in the maturity of startups focused on core AI technologies. Overall, she anticipates a decline in the volume of deals globally, with the US continuing to attract substantial funding, whereas India may see lower funding levels.
Hard to Evaluate Deep Tech Founders
In a conversation with AIM, Rahul Agarwalla, managing partner at SenseAI Ventures, an early-stage fund investing in AI-first startups, said, “In a world where every pitch deck claims to be ‘AI-powered’, VDAT (variety, data, architecture and team) helps us cut through the noise. It allows us to identify companies that aren’t just adding AI to existing workflows, but rethinking the problem itself through an AI-native lens, companies where the model is inseparable from the product, and the product wouldn’t exist or scale without it.”
The Rise and Dip
Based on Traxcn’s reports, the total funding reached $268.3 million in 2024, the highest in the dataset, with 49 funding rounds, second only to 2021’s 53 rounds. This surge reflects growing investor interest and larger deal sizes, indicating strong confidence in select startups’ growth potential.
Yet, 2025 is already witnessing a significant downturn. If the trend persists, it could mark the lowest investment levels since 2017, highlighting a possible retreat from early-stage funding and suggesting that many startups are struggling to secure necessary capital.
From 2021 to 2023, funding rounds ranged from 43 to 53 annually, but this year’s steep decline suggests reduced confidence in seed and angel-stage investments. Historically, funding spikes in 2018 and 2022 aligned with rapid AI adoption, indicating a tendency for larger bets on fewer startups rather than a proportional increase in funding rounds. This trend may significantly reshape the investment landscape.
Mittal explained that investors are being cautious due to the rising popularity of sectors like climate technology, electric vehicle supply chains and cross-border SaaS, which have drawn attention away from AI.
Investors now prefer AI startups with clear, paying customers and efficient, smaller teams of around 15 members, rather than larger groups. Valuation fatigue is also a concern. The hype in 2023 has inflated seed valuations to Series A levels, prompting angels to wait for prices to stabilise.
Investment is currently concentrated among a select group of investors familiar with AI or focused on deep-tech. Traditional angel investors and early-stage funds that typically support SaaS or consumer technology seem hesitant to engage.
However, Agarwalla sees SaaS as evolving rather than being outdated. While traditional SaaS provided valuable services with long sales cycles and hard-to-measure outcomes, AI-native companies deliver measurable ROI from day one. They boost productivity, enhance decision-making and automate workflows, actively driving efficiencies that impact the bottom line, he added.
Nonetheless, Mittal pointed out, “Angels haven’t vanished, they’re just pickier, writing smaller cheques, and hunting for startups that show real traction or deep tech. If you’re building something with a true data advantage and can prove to paying users, the doors are
still open, just expect more due diligence questions and leaner valuations than the 2023 peak hype.”
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