Why VCs and Lenders Signal Shift to Selective Capital and Better Design in 2026 Insights from early-stage venture firm Antler India and alternative credit platform BlackSoil illustrate how the year 2025 laid the groundwork, with 2026 shaping up to be a year of design rather than exuberance.
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India's startup and venture ecosystem has finished 2025 with a different temperament from the excess of the post-pandemic boom. Capital is flowing again, yet with sharper selectivity, with a focus on accelerated innovation and more defensible vectors. Policymakers and private capital are both now playing clearly demarcated roles.
Insights from early-stage venture firm Antler India and alternative credit platform BlackSoil illustrate how the year 2025 laid the groundwork, with 2026 shaping up to be a year of design rather than exuberance. Offering a ground-level view of capital formation and founder behavior, Nitin Sharma, Partner at Antler India, said that the firm's vantage point gives it early signals that traditional datasets often don't provide.
"With more than 75,000 founders reaching out to us at the idea stage in the last 5 years, we get a rare panoramic view of not just what is 'hot' already, but the ideas brewing in the minds and hearts of India's most ambitious entrepreneurial talent."
Antler's model is about working with founders before company formation. A route that has become increasingly selective as venture capital globally recalibrates risk. "Our Residencies enable us to work with the top 1 per cent of applicants, and subsequently invest in a subset of them as their first believer. Our extremely selective funnel has meant a selectivity rate of 0.1-0.2 per cent," said Sharma.
The selectivity has increasingly tilted toward artificial intelligence (AI) and deep technology. Antler's majority efforts in the last 18-24 months have been towards these sectors, resulting in 51 AI-native or AI-first startups in its portfolio, with 17 deep tech investments.
Capital Markets Rediscover Tech
One of the most important developments of 2025, according to Sharma, was the growing alignment between venture-backed innovation and India's public markets.
"2025 established more conclusively that the Indian capital markets are thirsty for technology-first plays, and that the VC ecosystem can produce healthy fund returns."
The year also saw a burst of IPOs in Q4, such as Meesho, Groww, Lenskart, Pine Labs, and PhysicsWallah. This indicates nearly 50 venture-backed companies that have gone public, accounting for USD 130-150 billion of market cap.
"Multiple funds have now seen single investments being able to return to a fund. Compared to the US or China, where 'tech' exposure accounts for 30-40 per cent+ of market portfolios, the typical Indian family / HNI / institutional portfolio has severely lagged (historically less than 5 per cent) exposure to innovative tech product companies that can have non-linearly compounding value," said Sharma.
A Healthier Venture Cycle
Historically, the total VC investment in the Indian market had grown from roughly USD 2 billion in 2012 to USD 40 billion during the post-COVID period. This figure dropped by half in 2022 and again by nearly half in 2023, reaching USD 10 billion.
Sharma believes the ecosystem today is structurally healthier than both the 2021 peak and the 2023 trough. "The last two years have been a slow but significant recovery, driven by much stronger fundamentals. In the absence of liberal late-stage capital, companies have had to build prudently and thoughtfully from the early days themselves, which has augured well for the ecosystem."
Design Over Disbursement
While venture capital debates scale and sovereignty, the credit ecosystem faces a parallel reality. According to Ankur Bansal, Managing Director at Blacksoil, 2026 will be less about volume and more about structure, particularly in MSME lending. "2026 is the design year for MSME credit. 2025 gave us proof, but just theory," said Bansal.
According to Bansal, MSME credit outstanding reached INR 31.3 lakh crore in FY2025, up 14.8 per cent, even as delinquencies improved to 1.70 per cent in March 2025. Policy changes have already done their part, but execution is now the differentiator.
"Policy built the safety net; lenders must build the product layer. Policy did the heavy lifting in 2025. ECLGS extended INR 3.68 lakh crore of guarantees across 1.19 crore facilities, creating a critical safety net. The real test in 2026 is execution; sharper underwriting using verifiable data, sector-specific products instead of one-size-fits-all loans, and terms that reward behaviour and formalisation, not just disbursal volume," said Bansal.
The firm's roadmap reflects this shift from growth-at-all-costs to institutional durability. "Alternative credit has moved from the margins to the core of MSME financing… our focus in 2026 is not just scale, but quality; designing patient, transparent, sector-specific debt that MSMEs can grow with across cycles," said Bansal.
Across both VC and credit, a common thread seems to emerge. The overall ecosystem is moving from experimentation to engineering. Whether it's AI-native startups facing global competition, deep tech founders tackling sovereign problem statements, or lenders restructuring MSME credit, 2026 appears to be less about exuberance and more about intent.
