Mobilising Domestic Capital Crucial To Power India’s Startup Growth Amid Foreig ...
As India emerges from a prolonged funding winter, venture capital is once again abundant, yet much of it remains unchannelled toward promising startups.While domestic investors hold significant ‘dry powder’, patient, conviction-driven capital is scarce. To fuel the next five years of startup-led growth, India needs strategic deployment of tens of billions of dollars, targeted sector focus, and long-term investor commitment to scale startups into global champions.
With around 70 per cent of startup funding reliant on foreign capital, India must channel its domestic dry powder to support homegrown ventures. India’s startup ecosystem continues to attract record funding, yet experts say domestic capital remains underleveraged, particularly for later-stage growth.
Missing Conviction Capital In India
The investors, pointed to the scarcity of patient investors despite abundant capital. VCs in India operate on eight to ten-year cycles. They cannot hold capital long-term. True patience comes from multiple tiers of investors over time.
Rahul Aggarwalla, Founder and Managing Partner, SenseAl, observed that the venture ecosystem has matured with increasing specialisation. “AI, interactive media, and digital platforms are now seeing sector-specific funds. Consumer spending has shifted online, creating opportunities for D2C brands and tech-first startups,” he noted.
He also pointed to government initiatives such as SIDBI’s fund-of-funds, which have strengthened the ecosystem, while noting untapped potential in pension and insurance funds as engines for growth. On investing in AI, he stated, “We are in the middle of funding spring. There is no funding winter.”
Furthermore, he added that while India’s startup economy relies heavily on foreign investment 70 to 80 per cent of venture funding the domestic ecosystem must build capacity to meet the demand for growth-stage capital.
Channeling Domestic Capital
Niyaz Laiq, Partner at Lumikai, highlighted India’s potential in gaming. “Indians spend USD 1.5 billion a year on casual and mid-core games, more than the total Indian box office,” he stated, stressing that Indian studios are now creating globally relevant titles, signalling a shift in India’s potential as a development hub.
Ntasha, Founder and Managing Partner, Ankurit Capital, called for greater involvement from family offices and domestic institutional investors.
“Anchor funds, partnerships with experienced GPs, and learning through repeated investments will unlock domestic capital. Today, most investors prefer liquidity from the stock market, but private markets offer wealth creation over the long term,” she explained.
Concluding the session, panelists urged entrepreneurs to think big and maintain conviction. “India needs more capital, especially for building infrastructure and manufacturing capabilities. Success will come to those who dare to dream, differentiate, and persist,” Ntasha said, emphasising the role of domestic patience and strategic investment in building a sustainable startup ecosystem.
The panel highlighted that while India’s startup funding has grown to USD 10 to 13 billion annually, building a USD 10 trillion economy will require not just more capital, but patience, sector-specific focus, and deliberate domestic investment.
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