AI and Deeptech Continue Leading Startup Investments
India’s startup ecosystem has demonstrated remarkable resilience in the first half of 2026, with artificial intelligence and deeptech ventures continuing to dominate funding flows. Even as overall deal activity becomes more selective, larger funding rounds are sustaining capital inflows and reinforcing investor confidence in scale-ready ventures.
Funding Landscape: Fewer Deals, Bigger Cheques
The funding data tells a story of disciplined growth. Indian tech startups raised **$7.2 billion** across 652 funding rounds in H1 2026, marking a **12% increase** from the $6.4 billion raised in H1 2025 . However, the number of funding rounds fell sharply by 43%, from 1,149 to 652 . This divergence—rising funding value with falling deal count—reflects a market that has “traded breadth for depth,” as investors concentrate larger cheques on fewer, stronger companies .
The concentration of capital is striking. Three transactions alone—CRED’s $900 million** round, Nxtra’s **$710 million round, and Neysa’s $600 million** funding—accounted for nearly **one-third of all capital deployed** during the half-year . Late-stage companies continued to attract the bulk of investor money, raising **$3.8 billion during the period, with institutional investors making “larger, more deliberate bets rather than spreading capital across many positions” .
AI Takes Centre Stage
Artificial intelligence has emerged as the defining investment theme of 2026. AI startups raised $676 million across 57 deals in H1 2026, recording a remarkable 317% year-on-year jump in funding, while deal volume nearly doubled with a 90% increase .
The momentum in AI funding can be attributed to several factors. The government’s IndiaAI Mission has strengthened investor confidence by supporting compute infrastructure and indigenous AI development . Investors are moving away from businesses where the moat is distribution towards companies where the moat is technology .
The emergence of AI unicorns has been particularly notable. Neysa and Sarvam, both founded in 2023, achieved unicorn status within about three years, while other startups took between eight and twelve years to reach the $1 billion valuation mark . Sarvam, which raised **$234 million**, is building India’s homegrown, multilingual AI intellectual property, positioning itself in the sovereign AI space . The startup reported revenue of ₹45.1 crore in FY26 and was valued at $1.5 billion post-money .
Similarly, Emergent, which enables non-coders to build web and mobile applications using AI agents, raised $130 million** in a Series C round led by Creaegis, reaching a **$1.5 billion valuation . The company has more than 12 million applications built on its platform and has reached a $120 million annual revenue run rate . Approximately 70% of its users have no prior coding experience .
Deeptech Momentum Strengthens
Deeptech continued building on the momentum witnessed throughout last year. Startups operating in the advanced hardware and technology segment secured $365 million during the half, up 17% year-on-year, while deal volume surged 53% to 66 deals .
Investor sentiment around India’s deeptech ecosystem has rarely been stronger. While deeptech startups raised around $610 million in H1 2026, down 25% year-on-year, investors argue the decline reflects the absence of large growth-stage rounds rather than weakening conviction in the sector . Deal activity has remained largely consistent, with 93 transactions in H1 2026 compared with 88 in the year-ago period .
“The mood is as positive as it gets,” said Arjun Rao, general partner at deeptech-focused VC fund Speciale Invest. “We are seeing immense activity. The quality and quantity of founders are increasing, early-stage activity is very good, and more funds are investing in deeptech today than they were a few years ago” .
Policy Tailwinds and New Funds
Beyond private capital, government initiatives have reinforced confidence in the sector. The Centre has rolled out the ₹1 lakh crore Research, Development and Innovation (RDI) Fund, expanded support through the SIDBI-backed Fund of Funds for Startups, launched the IndiaAI Mission, and stepped up incentives for strategic sectors such as semiconductors, defence, and space .
“There is a clear policy push to accelerate capital deployment into deeptech. The government’s mandate is to get more money into the ecosystem faster, and that intent is visible across multiple initiatives,” said Manu Iyer, founding partner at early-stage deeptech investor Bluehill VC .
Venture capital firms are also stepping up. Elevation Capital closed a $500 million** India fund to back early-stage AI startups, with nearly two-thirds of its investments over the past 12-18 months being AI-native . Aum Ventures launched its **$80 million India Innovation Fund II to back early-stage deeptech and IP-led startups across AI, spacetech, semiconductors, and defence . Shastra VC launched a $100 million fund to back early-stage startups in AI, spacetech, defence, and climate sciences .
New Unicorns and Global Ambitions
Despite the more selective funding environment, India added five new unicorns in H1 2026, matching the previous year’s tally despite the overall moderation in funding . The new unicorns included Neysa, Sarvam, KreditBee, Skyroot, and Square Yards, spanning artificial intelligence, fintech, spacetech, and proptech .
The ecosystem’s growth is also reflected in public markets. Thirteen technology IPOs were completed during the period, with average market capitalisation at listing rising to **$297 million** from $162 million a year earlier . Notably, 75% of India’s listed startups are now profitable, indicating that public market investors increasingly reward companies capable of balancing growth with operational efficiency .
The Road Ahead
Going into the second half of 2026, VCs are expected to remain focused on AI, deeptech, and semiconductor-driven innovation . While large late-stage funding rounds may remain scarce amid global liquidity constraints, India’s startup ecosystem appears to be entering a more mature phase—one characterised by disciplined capital deployment, stronger fundamentals, and increasing investor preference for technology-led businesses capable of generating long-term value .
With policy support strengthening, specialised capital becoming more readily available, and a new generation of globally ambitious founders emerging, India’s AI and deeptech ecosystem is positioned to produce more companies capable of raising sizeable growth-stage rounds in the years ahead .
