Karnataka Tech Funding Falls in 2025 as Capital Shifts Toward Early-Stage Startups: Tracxn Karnataka Raised USD 3.8 Billion in 2025 Amid Sharp Decline in Late-Stage Funding

Karnataka's technology ecosystem saw a clear change in funding patterns in 2025, with investors shifting focus away from large late-stage bets toward rebuilding the pipeline of younger companies.

Total funding for the year stood at USD 3.8 billion, marking a 28 percent decline from 2024. Deal activity also slowed, with the number of transactions dropping by 27 percent year on year, pointing to a more cautious and selective investment climate rather than broad-based expansion.

After the first quarter, Tracxn released its annual assessment of the Karnataka tech ecosystem, outlining how capital flows, sector priorities, and exit trends evolved during 2025. The report shows that while overall funding moderated, the year was defined by strong divergence across stages, sectors, and company maturity levels.

In comparison with earlier years, funding levels in 2025 were lower than the USD 5.4 billion raised in 2024 and the USD 5.0 billion raised in 2023. However, this decline was not evenly spread across all stages. Seed-stage startups raised USD 434 million during the year, down 17 percent from 2024 and slightly below 2023 levels.

Early-stage funding, by contrast, proved resilient, with companies raising USD 1.6 billion, a 32 percent increase over 2024 and a 37 percent rise from 2023. Late-stage funding experienced the sharpest pullback, falling to USD 1.8 billion, roughly half of what was raised in 2024.

Sector-wise, enterprise applications, fintech, and retail emerged as the top recipients of capital in Karnataka during 2025. Enterprise applications attracted USD 1.1 billion, broadly in line with the previous year, though slightly below 2023 levels.

Fintech saw a notable rebound, with funding rising 47 percent year on year to USD 1.0 billion, reflecting renewed investor interest in digital financial infrastructure. Retail tech funding declined to USD 920 million, down significantly from the highs recorded in 2023 and 2024.

Large funding rounds became less frequent during the year. Karnataka recorded only three funding rounds above USD 100 million in 2025, compared to nine such rounds in each of the previous two years. Zepto raised USD 300 million in a Series H round, Groww secured USD 202 million through a Series F round, and Jumbotail raised USD 120 million in a Series D round. These deals were concentrated in sectors such as food and agri tech, fintech, and retail.

In terms of new high-value company creation, Karnataka added three new unicorns in 2025, compared to five unicorns in 2024 and one unicorn in 2023. On the public markets front, Karnataka tech companies recorded nine IPOs in 2025, up 13% from eight IPOs in 2024 and up 200% from three IPOs in 2023, with Groww, Meesho, and Ather Energy among the companies that went public during the year.

Mergers and acquisitions remained active, with 46 deals completed in 2025. This was slightly lower than the previous year but higher than 2023. The largest transaction was Groww's USD 150 million acquisition of Fisdom, followed by ICRA's acquisition of Fintellix.

Geographically, Bengaluru continued to dominate Karnataka's tech landscape, accounting for nearly all funding raised in the state. Investor participation remained active across stages in 2025, with Antler, Rainmatter, and Inflection Point Ventures leading seed funding, Peak XV Partners, Accel, and Elevation Capital active at early stage, and Sofina, SoftBank Vision Fund, and Think Investments supporting late-stage companies.