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India’s startup ecosystem is still navigating choppy waters, even as funding saw a temporary lift in May 2025. According to Entrackr’s latest report, Indian startups raised $1.14 billion across 98 deals—a 53% jump from April’s dip to $745 million.
Despite this recovery, May marked the second-lowest funding for that month in five years, pointing to a still-cautious investor mood. The surge was driven by a few large-ticket deals, including PB Healthcare’s $218 million seed round and Porter’s $200 million Series F. Early-stage startups raised $505 million across 66 deals, while growth and late-stage rounds brought in $637 million from 25 deals.
Funding trends over the past year remain volatile. After peaking at $1.92 billion in June 2024, monthly totals have swung sharply—dropping to $835.95 million in July, rebounding in August, September, and January 2025 ($1.76 billion), and declining again. The inconsistency reflects persistent market uncertainty.
Despite sectoral diversity, deal volume remains flat, and capital is clustered in a few companies. “Another worrying trend is the rise in down rounds, with some startups raising funds at valuations slashed by up to 90% as investors prioritise sustainable unit economics over hypergrowth,” says an industry analyst.
The media and advertising industry, once fuelled by startup-led campaigns across marquee properties like the IPL, is adjusting to a new normal—where funding spikes are rare and marketing budgets are tighter.
A&M Sector Keeps a Wary Eye
This funding squeeze comes as many agencies and platforms face margin pressures and delayed client payments. Only a few digital-first players in niche segments have seen sustained momentum. A further dip in consumer demand could deepen the strain.
For ad-dependent sectors that rely heavily on startup-driven marketing spends, the uneven recovery signals another year of unpredictability. Until consistent capital flow returns, marketing budgets from the startup cohort are likely to stay conservative, keeping the pressure on agencies and media platforms alike, says media planners.
Shradha Agarwal, Co-Founder & Global CEO, Grapes Worldwide, notes, “Though startup funding rebounded in May, it is still far away from driving the complete recovery of the sector. This can ultimately have a significant implication on the A&M industry as well, dampening the ad or marketing budget shelled out by the startups.”
“In order to cope with the situation, it is very likely the startups will undertake cost control measures where there will be incessant focus on optimizing the ad spending. Consequently, a substantial shift can be expected with startups steering away from high-cost campaigns to a more lower-funnel approach to fuel conversion-oriented campaigns,” she adds.
Prasanna Iyer, CEO of Rezilient Digital, echoes the sentiment, “The overall environment is still cautious—especially for early-stage startups. For advertising and marketing, this means tighter budgets and a strong push towards improving KPI across the funnel be it branding spends or ROI driven perf marketing.”
For ad-dependent sectors that rely heavily on startup-driven marketing spends, the uneven recovery signals another year of unpredictability. Until consistent capital flow returns, marketing budgets from the startup cohort are likely to stay conservative, keeping the pressure on agencies and media platforms alike, industry experts say.
“Due to ongoing funding pressure across early and growth-stage companies, we are seeing sharper budget discipline, with brands favoring performance marketing, UGC, and creator-driven content over traditional high-cost media. This is specifically in categories like Beauty, Health & Wellness and Fashion,” says Sayak Mukherjee, Founder at Brandwizz & Creatorcult Media.
Digital ad spends are being broken down into shorter bursts, closely monitored for attribution and ROI. This has led to a rise in modular campaign structures, where creators are onboarded for quick, repeatable content rather than one-time endorsements. The focus now is on efficiency, not excess — every impression is expected to justify its cost, Mukherjee added.
Focus on AI & influencer marketing
The current scenario indicates that more and more performance-driven campaigns will be prioritized over brand-building efforts to exercise cost-efficiency, industry leaders say.
“There might be a spike in ROI-driven marketing to reap measurable outcomes in the form of leads, conversions, and CAC (Customer Acquisition Cost) optimization amidst funding constraints. Digital advertising, SEO, influencer marketing, etc., can witness a surge in demand as compared to traditional advertising for enabling targeted reach and measurable performance,” Agarwal noted.
Brands are focussing a lot on AI-tools across marketing departments to cut their spends. According to Iyer, “AI-driven optimization starts to play a big role. It helps cut waste, personalize outreach, and improve decisions with real-time data. We are seeing a lot of this here at Rezilient.”
Another subdued year?
The funding stress has triggered the speculations within the industry that AdEx may not reach its projected figure for another year.
Notably, AdEx has remained flat in 2024 as well, impacted by inflation, Lok Sabha elections, weak demand, and global headwinds. Even FMCG majors had slashed their budgets. The Pitch Madison Advertising Report (PMAR) had forecast 12% growth for 2024 (to ?1.11 lakh crore), but actual growth was only 8%, ending at ?1.08 lakh crore.
PMAR estimates a recovery in 2025 with 11% growth to ?1.2 lakh crore. However, looking at the first five months, experts fear muted sentiment could persist, keeping growth in single digits.
A media planner cautions, “Not just startup funding, consolidation and merger of larger media houses (Disney and Viacom18) and advertising giants (Omnicom and IPG, slated for year-end), coupled with prolonged weak demand, may have cascading effects on AdEx this year as well.”
Upcoming IPOs give hopes
Despite the funding pressures, the Indian startup ecosystem could see a sentiment shift later in the year if anticipated IPOs materialize. High-profile companies such as BlueStone, Lenskart, OfBusiness, and PhysicsWallah have IPO plans in the pipeline, with filings potentially totaling $10 billion, industry leaders pointed out.
“Successful listings could unlock investor confidence and signal a broader revival. Until then, however, the startup sector—particularly B2B ventures—must brace for continued scrutiny and adapt to a capital environment where efficiency trumps exuberance,” an analyst quips.
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