Domestic consumption and application-driven models to dominate investor interest, noted Vipul Patel, Partner, Seed Investing, at IIMA Ventures.

“We see a tailwind in deeptech companies especially the ones catering to erstwhile closed industries such as defence, aerospace, spacetech and others,” noted Patel.

He said that mobility will evolve going forward and AI will emerge as a big trend for VCs as it has become a buzzword. Sectors such as semiconductor, quantum sensing & frontier applications within spacetech will continue to attract investor attention.

“Domestic consumption and application based themes would be mainstream moving forward for a couple of years,” he added.

Funding ecosystem

Patel noted that early-stage investments, especially in Seed and Series A rounds, marks a decisive recovery from the funding winter.

“Deal activity at the seed level upto series A has been active and deal flow continued to be robust. We have evaluated more than 400 deals this year alone,” he said.

He added that startups with  a cleaner business model and a path to commercialisation have attracted  investors’ attention.

IPO activity has been another key highlight, with startups like Swiggy finding success in public markets. Larger exits through IPOs have also generated liquidity, offering a positive outlook for future funding cycles.

“There is renewed interest in India’s ability to understand and value new age business models as the bull market resulted in increased risk appetite for private and public market investors,” he said.

He noted that M&A market for tech startups is still nascent and will pick up. “In the next 5 years as the capital cycle continues to mature along with its investors we shall see a better uptick in that activity relatively speaking,” he added.

However, challenges remain. Global interest rate dynamics and foreign investment pullbacks have pressured  the Indian ecosystem. Despite this, domestic capital is stepping in to fill the gap, buoyed by strong performance across asset classes and bullish market sentiment.