Free tool: Equity dilution calculator — See founder dilution, price per share and the option-pool shuffle for your next round.
The market in 2026
- 2025: Indian tech startups raised about USD 10.5 billion (Tracxn), down 17% on 2024; Inc42 counted USD 11 billion across 936+ deals. Bain’s broader VC and growth measure put 2025 at about USD 16 billion across 1,300+ deals.
- January–September 2026: USD 10.3 billion, up about 7% year on year, but with 38% fewer rounds (Tracxn) — more money is going into fewer, larger early-stage rounds.
- Q3 2026: about USD 2.2 billion raised, up 5% year on year, with deal count down 13% to 210 (Inc42) — investors are being selective. Public markets are open: Moneyview listed at roughly a 62% premium on 1 October 2026.
- Hot sectors: enterprise software, fintech and AI — AI funding in H1 2026 was up more than 300% year on year (Inc42).
- What it means: seed money is scarcer, so traction, clean books and a credible path to a Series A matter more than ever.
Funding stages
| Stage | Typical investors | What they want to see |
|---|---|---|
| Pre-seed / angel | Founders’ network, angels, angel networks and funds | Team, problem insight, an early product |
| Seed | Seed funds, angel funds, micro-VCs | Product in market, early users or revenue, a clear wedge |
| Series A | Institutional VCs | Repeatable growth, unit economics that work, a team that can scale |
| Series B and later | Growth VCs, PE, strategic investors | Scale, efficiency, a path to profit or IPO |
Instruments Indian law allows
- Equity shares — simplest; common for angels.
- CCPS (compulsorily convertible preference shares) — the standard VC instrument, carrying liquidation preference and investor rights. Under FEMA only fully and compulsorily convertible instruments count as equity.
- Convertible notes — only for DPIIT-recognised startups; a non-resident must invest at least ₹25 lakh in a single tranche, and the note must convert or be repaid within 10 years. See DPIIT recognition.
- iSAFE — India’s version of the SAFE, structured as CCPS. A US-style SAFE can’t be issued directly by an Indian company, because the Companies Act only allows equity and preference shares. Raising on SAFEs through a US company? See SAFE notes.
- CCDs — compulsorily convertible debentures, used in some structures.
The legal steps after you agree terms
- Valuation: a registered valuer’s report for preferential allotment under the Companies Act; for foreign investors, a FEMA fair-value certificate from a CA, SEBI-registered merchant banker or practising cost accountant — shares can’t be issued to non-residents below fair value. Angel tax no longer applies — see angel tax.
- Approvals: board and special resolution; MGT-14 filing.
- Private placement: offer letter in PAS-4 to no more than 200 persons a year (excluding QIBs and ESOP employees), money into a separate bank account, allotment within 60 days.
- Return of allotment (PAS-3) within 15 days — the funds can’t be used until it’s filed.
- Foreign investors: FC-GPR within 30 days of allotment, then the annual FLA return.
Running the process
- Get ready (6–12 weeks before): clean books, a driver-based model, a cap table that ties to every PAS-3, and an organised data room.
- Build the list: investors who lead at your stage and sector; warm introductions where possible.
- Run it tight: batch first meetings into a few weeks so interest overlaps.
- Negotiate the term sheet — see term sheets explained.
- Close: diligence, definitive agreements, allotment and filings.
What investors check in due diligence
- Corporate records, annual filings and resolutions; a cap table that matches the PAS-3 filings.
- FEMA filings (FC-GPR, FC-TRS, FLA), tax returns, GST and TDS.
- ESOP plan approvals, IP assignments from founders and contractors, key contracts and any disputes.
- Raising from US investors into a Delaware company? See the US diligence checklist.
Government schemes
- Startup India Seed Fund Scheme: grants up to ₹20 lakh and up to ₹50 lakh in convertible debt through incubators — applications from startups closed on 31 May 2026; disbursals continue.
- Fund of Funds for Startups and the new ₹10,000 crore Fund of Funds 2.0 (2026) invest through SEBI-registered AIFs.
- Credit Guarantee Scheme for Startups: guarantees on loans up to ₹20 crore per borrower.
Want someone who has done it to run your raise? See fundraising advisory.
Frequently asked questions
How much funding did Indian startups raise in 2025?
About USD 10.5 billion according to Tracxn and USD 11 billion across 936+ deals according to Inc42; Bain's broader VC and growth measure put it at about USD 16 billion.
What instruments do Indian startups use to raise funding?
Equity shares, compulsorily convertible preference shares (CCPS, the standard VC instrument), convertible notes (only for DPIIT-recognised startups), iSAFEs structured as CCPS, and compulsorily convertible debentures.
Can an Indian company issue a SAFE note?
Not a US-style SAFE directly, because the Companies Act allows only equity and preference shares. The Indian alternative, the iSAFE, is structured as compulsorily convertible preference shares.
What filings are needed after raising funding from a foreign investor?
A FEMA valuation before issue, board and shareholder approvals, private placement filings including PAS-3 within 15 days of allotment, FC-GPR within 30 days of allotment, and the annual FLA return.
Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.