To address the cooling venture capital market, the government has launched the Research, Development and Innovation (RDI) scheme with ₹7,131 crore in funding for 14 venture capital firms and five research institutions. While recent data shows a trend of fewer, larger deals, this liquidity boost aims to support startups when private investors are becoming more cautious. Investors will track how this capital impacts deal volumes in early-stage segments.
The Indian government has launched its Research, Development and Innovation (RDI) scheme, committing ₹7,131 crore to support the startup ecosystem. This capital will be disbursed through 14 selected venture capital firms and five research organizations, including established names like Chiratae Ventures, Blume Ventures, and Kalaari Capital, alongside specialized funds such as Speciale Invest and TVS Capital Funds. This government-backed injection arrives at a critical time for the domestic venture capital market, which has recently shown signs of slowing activity.
Market Shift Toward Larger Transactions
The venture capital landscape in the third quarter of 2026 saw total investments reach $2.7 billion across 248 deals. While the total value increased marginally by 3% compared to the same period in 2025, the number of transactions dropped by 8%. This decline in deal volume highlights a shift in investor strategy. Capital is increasingly concentrating on fewer, larger transactions, with 13 deals exceeding $50 million. Conversely, smaller, early-stage deals under $2 million have decreased, dropping from 96 transactions in the previous year to 83. The median size for growth-stage deals has climbed to $10.4 million, suggesting that private investors are prioritizing mature companies over new, early-stage ventures.
Sector-Specific Performance
The technology sector, which has traditionally driven startup funding, experienced a 14% drop in deal volume. B2B software was particularly affected, with transaction volumes falling by 27%. Despite high-profile fundraises by companies like Emergent Labs, Freehand.ai, and Sarvam AI, the broader segment struggled to maintain growth momentum. Deeptech investments also stagnated with 39 deals, failing to surpass the 40 transactions recorded in the third quarter of 2025.
However, some sectors displayed resilience. E-commerce saw a 14% year-on-year increase with 58 deals, while manufacturing recorded a 17% rise in volume to 47 deals. These results indicate that institutional backers are being more selective, choosing industries with clearer growth paths while reducing exposure to the broader software space.
Impact of the RDI Fund
The RDI fund aims to provide the necessary liquidity to prevent a prolonged funding winter for early-stage startups that are currently facing a drought in private capital. By supporting daughter funds that have expertise in various sectors, the government intends to stimulate activity across the ecosystem. The effectiveness of this scheme will be determined by how quickly and efficiently these venture capital firms can deploy the capital into promising startups. Investors and market watchers will monitor the pace of fund deployment and whether this intervention can successfully reverse the current trend of declining transaction volumes in the coming quarters.