Artificial intelligence-led startups dominated investor interest, while consumer tech, fintech and healthcare continued to attract venture capital flows during the year. Experts said investments in AI would further accelerate over the next year.
The big question through the past year was the long-term impact of AI. Investors asked how AI translated to different sectors. While it generated headwinds for some software and services companies, it provided tailwinds in other areas, like fraud detection, cybersecurity and customer service, according to experts.
Data showed that the first quarter of FY26 saw investments of $2.4 billion across startups, which rose to about $2.6 billion each in the next two quarters. The momentum slipped in Q4, with funding declining to $2.2 billion amid global uncertainties that weighed on markets across segments.
When the final quarter was compared against the same period the previous year, the slowdown was even more pronounced, as funding fell 22.7% from $2.9 billion a year earlier.
ETtechAI-first
According to industry analysts, AI stood out as the favourite theme for investments during the year as many AI-native startups emerged and every sector moved to leverage the technology.
Venture capital firm Lightspeed India noted that AI had dominated its investments in the last 18 months. “In line with the changes brought about by the introduction of foundational models, we invested in newer companies in AI across both consumer and enterprise,” partner Rahul Taneja said, citing portfolio companies such as Oolka, Sarvam and Aqqrue.
Of the total deals in FY26, about 33–35% were in the consumer tech segment, which saw AI integrated into spaces like ecommerce, quick commerce, wealthtech, entertainment and wellness. This was followed by investments in core AI/ML startups, which accounted for almost 22–24% of deals. Among the standouts, Emergent Labs, a vibe coding startup, raised $70 million from Khosla Ventures and SoftBank, valuing it at $300 million after the funding round.
Investments in the segment were expected to persist, as AI continued to show salience across multiple areas, according to Prabhav Kashyap, partner, Bain & Company.
“You saw AI-native companies emerge, but you also saw existing tech services and software businesses leverage AI to reposition themselves, using it as a tailwind to improve internal efficiency and their offerings to clients,” he said.
ETtechEarly vs growth: Who won
In FY26, early-stage activity showed a divergence between deal volume and funding value. There were 589 deals, with total early-stage funding coming in at nearly $3 billion across segments including wellness, fashion, consumer tech, AI and deeptech. Growth-stage funding, meanwhile, recorded 388 deals but drew significantly higher funding of $7 billion, indicating larger cheque sizes despite fewer transactions.
According to Gaurav Chaturvedi, general partner at Kae Capital, FY25 had seen outsized growth-stage activity driven by a handful of large rounds that did not repeat in FY26. “The early-stage picture in FY26 is very encouraging. Entry points became compelling again, dry powder found conviction, and AI created a fresh wave of company formation,” he said.
While multiple AI-first startups were formed during the year, the period also saw the emergence of vertical commerce in segments like fashion, home services and food.
“Early-stage was where the real experimentation happened. That’s where new ideas were tested, new categories were built and consumer behaviour was reshaped,” said Abhiram Bhalerao, partner at V3 Venture. “That’s where the next wave of scalable businesses will come from.”
ETtechNiche but not least
While AI, consumer tech and fintech made headlines, segments like spacetech and defencetech quietly recorded a gradual pickup in funding during FY26, clocking $178 million and $134 million, respectively. Deeptech also saw renewed investor interest, raising about $1 billion in capital, according to Venture Intelligence data.
ETtechIn this space, Digantara raised $50 million in a Series B backed by Peak XV Partners, Kalaari Capital and 360 ONE Asset; EtherealX secured $20.5 million in a round co-led by TDK Ventures and Accel; and Agnikul Cosmos raised $17 million at a $500 million valuation with backing from HDFC Bank and 100X VC and others.
“What changed in both space and defence was that these were no longer seen as fringe, long-gestation bets. There was real visibility on use cases, faster validation cycles and a growing willingness among investors to back them earlier despite inherent complexity,” said Yash Jain, associate vice-president at Blume Ventures.
In the consumer segment, fashion and lifestyle investments picked up pace over the past two to three quarters, with brands such as CityKart, Giva and Style Union receiving significant cheques in FY26.