In 2025, VC fundraising will have increased fivefold to $3.3 billion

LPs return to India VC funds with sharper scrutiny as exits and IPOs boost confidence

Limited partners (LPs) are returning to India-focused venture capital funds after a slowdown, but with stricter evaluation standards. Instead of backing large fund sizes or aggressive growth stories, LPs are prioritising consistent performance across market cycles, realised exits, IPO track records, and team stability, industry executives told The Economic Times.

“LPs have become much sharper in their approach. They look at performance over multiple cycles, exits, IPOs, and the depth and longevity of the team,” said Nithin Kaimal, partner at Bessemer Venture Partners.

This renewed confidence is reflected in fundraising activity. Peak XV Partners (formerly Sequoia Capital India) is raising its first independent fund targeting $1.2–1.4 billion. Z47, earlier Matrix Partners India, is seeking $300–400 million for its first standalone fund, while Elevation Capital has launched a $400 million vehicle to back long-term, public-market-ready companies.

According to Venture Intelligence data analysed by ET, India-focused VC funds raised over $3.3 billion in 2025—nearly five times the amount raised the previous year. Major fund closures included Nexus Venture Partners ($700 million), Accel India ($650 million), Bessemer Venture Partners ($350 million) and Fireside Ventures ($253 million).

Exit visibility boosts sentiment

Improved exit visibility, especially through IPOs, has been a key driver of LP confidence. Companies such as Zepto, PhonePe, Oyo and Boat preparing for public listings have reassured investors about capital return timelines.

Navin Honagudi, managing partner at Elev8 Venture Partners, said LP sentiment towards India has turned decisively positive as investors are finally seeing a full venture cycle play out. “The idea that venture capital locks up money indefinitely is changing,” he said.

Team stability under the spotlight

At the same time, LPs are closely watching leadership churn at large VC firms. Peak XV, Z47 and other firms saw several senior departures in 2025, raising questions about continuity, experience and the ability of departing partners to raise funds independently.

AI strengthens India’s appeal

LP interest is also being shaped by India’s growing role in artificial intelligence. Investors increasingly view India as a global hub for AI-led software and services, leveraging strong engineering talent and cost advantages.

Fireside Ventures partner Adarsh Menon said LP discussions focused more on the firm’s track record and the strength of India’s consumption story than on short-term macro risks. Fireside’s first fund delivered a 3.5x return, helping make its latest fundraising relatively smooth.

Overall, while LPs are back in the Indian VC market, they are investing with greater discipline—favouring proven managers, clear exits and sustainable long-term value creation.