How Indian LPs Should Approach Early Stage VC Now

The 2020–22 cycle was a sugar high. Cheap money, crossover FOMO, and “growth-at-all-costs” playbooks pushed prices to places the fundamentals did not justify.

That party ended. And that’s precisely why 2025 looks like the best entry vintage for Indian venture capital in years.

Exit Windows Are Back — And More Predictable

The single biggest improvement is liquidity. India’s public markets reopened for growth assets in 2024 and have stayed receptive into 2025.

At a macro level, India raised a record INR 1.6 Lakh Cr via IPOs in 2024 with a thick pipeline rolling into 2025 — unmistakable evidence that capital markets are functioning for issuers again.

Inside a VC or PE, exit value held up and tilts increasingly toward public markets: Bain pegs 2024 VC exits at ~$6.8 Bn with the share of public market exits jumping from 55% to 76% over 2023–24, aided by a 7X surge in IPO exit value.

That is the kind of mix LPs love because it improves timing and price discovery. EY’s 2025 trendbook shows the broader PE/VC ecosystem delivered $26.7 Bn of exits in 2024, and the number of PE-backed IPOs rose 33% (40 vs. 30 in 2023). Translation: more paths, more volume, more confidence.

Round Dynamics Favor Disciplined Buyers

Funding has thawed from the freeze, but the heat of 2021 is not coming back (thankfully). Venture/growth funding in India rebounded to $13.7 Bn in 2024 (1.4X more than 2023), yet investors and founders reset their expectations — megadeal sizes fell 20% and pricing turned more conservative.

The narrative inside boardrooms shifted to profitability and durable unit economics, not top-line stunts.

That is the exact cocktail you want when committing to a 10-year fund: activity is healthy, but terms and structures are sane.

Founders Are Building To Last, Not To Trend

The “grow-burn-raise” loop has given way to “build-earn-scale.” Consumer tech rebounded, SaaS stayed steady, and even quick commerce gained credibility by proving operating leverage at scale.

Investors saw fewer vanity metrics and more paths to profit; that is not just talk. Bain highlights the ecosystem’s tilt toward profitability and regulatory alignment as a 2024 hallmark.

This creates cleaner cap tables, better governance, and more mature follow-on rounds in 2026–28. It was the period many 2025-vintage funds will be harvesting first markup signals.

India’s Strong Pool Of Domestic Managers

The manager landscape is no longer just a handful of global franchises parachuting in.

We have a rising wave of India-domiciled GPs and specialist funds with dense local networks—operators, policymakers, distribution partners, and customers.

In 2024, maiden funds made up a third of VC/growth capital raised, family offices and corporate VCs increased activity 1.8X, and local platforms kept showing up in competitive processes.

These are not tourists; they are builders.

The plumbing also scaled: SEBI’s AIF market now sits on trillion-rupee commitments, with Category I/II vehicles providing a robust chassis for domestic capital formation, while the government’s Fund of Funds (SIDBI) has committed INR 10,000 Cr to 141 AIFs— anchoring many homegrown GPs.

You can feel it in the headlines too — debut deeptech andmicro-VC funds are closing with majority Indian LP bases, a sharp break from the 2016–20 era.

Policy Tailwinds Reduce Friction And Expand The Opportunity Set

Regulatory friction has eased meaningfully. The elimination of the “angel tax,” a cut in LTCG rates, and simpler FVCI registrations tightened the feedback loop between startups and capital — a big deal for seed to Series B.

On the fund side, SEBI’s push to dematerialise AIF units is boring, yes, but it is exactly the sort of back-office hygiene that improves transparency, reduces settlement pain, and makes domestic LPs more comfortable writing larger tickets. Net effect: fewer loopholes, more alignment, faster cycles.

Why The 2025 Vintage Specifically?

• Valuations have normalised, but optimism is back. 2023 washed out the excess; 2024 reopened markets; 2025 gives you price discipline plus momentum. That is when vintages historically outperform. The 2025 H1 data shows India ranked 3rd globally for tech startup funding despite a downshift, implying competition is rational while the pipeline stays busy—a buyer’s market, not a fire sale.
• Exit lines are visible. The IPO calendar is active; secondaries and open-market blocks are viable; strategics are shopping again. That compresses holding periods and de-risks DPI for 2025–27.
• Manager quality is up. More sector-native, locally embedded GPs with operating depth and better governance standards mean stronger choice and post-investment value creation. The proliferation of new, focused funds and domestic LP capital is a structural — not cyclical — shift.

So What Should Indian LPs Do Now?

Back managers who lean into themes where India has real comparative advantage (financial rails, manufacturing upgrades, energy transition, applied AI, defence and space tech) and who have shown they can price risk, not chase rounds.

Seek funds with true local origination (customers, regulators, supply chains), credible follow-on syndicates, and a history of getting companies IPO-ready, not just “next-round ready.”

As things stand today, Alpha accrues to patience on entry and aggression on company-building.

Bottom line: the froth is gone, liquidity is back, the GP bench is deeper, and founders are building sturdier companies. That is exactly the setup you want when you lock in a vintage. We are now at that vintage.

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