Two headlines ran in the same month. One said Indian startup valuations had hit rock bottom. The other said a seed-stage Bangalore startup had just priced its round at a valuation triple what the same metrics would have commanded a year earlier.
Both were true. That is the real story sitting inside this data, not a market going up or a market going down, but a market splitting cleanly in two.
In the US, Carta’s tracking found the median pre-money valuation on a new seed round hit $16 million in 2025, a record high, even as the total number of new venture rounds fell to a six-year low. Fewer companies are raising money. The ones that do are commanding prices nobody would have predicted three years ago.
India is living through the same split, with sharper edges on both sides. This startup valuation trends report works through what the 2025 data and the early 2026 numbers actually show, for the companies that are winning this market and the ones quietly resetting.
The Bifurcation, By The Numbers
Indian tech startups raised $11.7 billion in FY26, an 18 percent drop from the $14.3 billion raised in FY25, according to Tracxn’s annual funding report. But that single number hides the split entirely. Early-stage funding actually rose 33 percent year-on-year to $4.8 billion, while late-stage funding fell 38 percent to $5.6 billion. Seed funding alone declined 15 percent to $1.3 billion.
Read that correctly and the picture is not a market in retreat. It is capital moving away from companies that raised at peak prices in 2021 and 2022 and are now too expensive to defend, and toward newer companies whose metrics still justify a premium. The same pattern shows up in the US data. Carta recorded just 4,859 new venture rounds across all of 2025, the lowest annual total in at least six years and down 41 percent from the 2021 peak, even as valuations at almost every stage climbed to new highs. The bottom half of all startups that raised money in 2025 collectively took home just 14 percent of total capital. The top 10 percent took home roughly half.
Fewer Mega-Rounds, More Domestic Capital
The clearest signal of this shift in India is the disappearance of the mega-round. Startups raised just 13 rounds above $100 million in FY26, compared with 23 in FY25, a return to roughly the same pace as FY24. Investors are not short on capital. They are short on companies they are willing to price at the scale that defined 2021.
What is filling the gap is a different kind of investor altogether. Domestic LPs and family offices participated in 22 percent of Indian startup deals in 2026, up from just 14 percent in 2024, according to UpForge’s ecosystem tracking. That shift matters for valuation specifically, because domestic capital tends to underwrite on more conservative, cash-flow aware terms than the global growth funds that drove 2021’s pricing. A founder negotiating with a family office in 2026 is having a fundamentally different valuation conversation than a founder negotiating with a global growth fund in 2021, even if the cheque size looks similar on paper.
The AI Premium Is Already Priced In
Inside India’s slower overall funding number, one category is pulling valuations sharply upward. AI and deep tech startups captured $920 million, or close to 27 percent of tracked funding, and are commanding valuation premiums of 40 percent or more over comparable non-AI companies, per UpForge’s sector data. Krutrim, Sarvam AI, and Mad Street Den are the category’s reference points that other AI rounds get priced against.
The same distortion shows up at a much larger scale in the US. Carta’s year-end review found that 58 percent of all cash raised at the Series D stage in 2025 went to AI startups, and median valuations at Series E and beyond rose by a staggering 667 percent year-on-year, driven almost entirely by a small number of enormous AI rounds. Whether or not a founder is building an AI company, the comparable-company exercise that any investor runs before pricing a round is now being skewed by these AI outliers in ways that founders need to account for, not assume away.
| US Down-Round Frequency (Carta) | Share Of All New Rounds |
| Q2 2023 through Q1 2025 (7 of 8 quarters) | Above 20% |
| Q3 2025 | About 17% |
| Q4 2025 | Below 14% |
When Public Markets Disagree With Private Markdowns
Lenskart is the cleanest illustration of where the “flight to quality” half of this story actually lands. Bankers were pitching the company’s IPO in December 2025 against a target valuation of $7 billion to $8 billion. By June 2026, its listed shares were trading at a market capitalisation north of ₹86,000 crore, comfortably above $10 billion and well past what its own bankers had projected just months earlier. Public investors, working off audited numbers and a profitable run rate, priced the company more aggressively than the private market had.
BYJU’S sits at the opposite end of the same chart. Once valued at $22 billion at the peak of its 2021-22 raise, industry estimates now place the edtech company’s worth under $2 billion, a company still working through legacy losses and governance issues that investors have not forgotten. Both companies raised their defining rounds in the same broad window. Five years later, one is a profitable public company trading above its private target, and the other is a cautionary case study in what happens when a valuation outruns the business underneath it.
The Take Nobody Will Say Out Loud
Valuation stopped being a single market-wide number the moment capital started concentrating this hard. There is no longer one answer to “how are valuations doing this year.” There are two answers, and which one applies to a given founder depends entirely on which side of the flight-to-quality line their metrics put them on.
The founders still getting hurt in 2026 are the ones pitching a 2021-style story-driven valuation to investors who have already moved on to a metrics-driven one. A registered valuer’s Fair Market Value certificate, required under RBI and FEMA rules for any round involving a non-resident investor, will not save a valuation that the underlying revenue cannot support. It only documents the number. It does not defend it in the next round.
The uncomfortable truth is that the investors who look the most generous right now, the ones paying AI-level premiums or post-IPO public market prices, are not being generous at all. They are paying full price for the small set of companies they are now certain will work, while everyone else negotiates from a position the 2021 market never prepared them for.
Frequently Asked Questions
What are the main startup valuation trends going into 2026? The clearest trend in this startup valuation trends report is bifurcation: total deal volume keeps falling while valuations for the strongest companies keep climbing to record highs. In India, early-stage funding rose 33 percent year-on-year even as overall funding fell 18 percent, showing capital concentrating into fewer, better-priced bets rather than disappearing.
Are startup valuations going up or down in 2025 and 2026? Both, depending on which company you look at. Median seed and Series A valuations in the US hit record highs in 2025 according to Carta, while down-round frequency fell to under 14 percent by Q4, yet total deal volume dropped to a six-year low, meaning fewer companies are clearing the bar to raise at all.
Why are AI startups commanding higher valuations than other sectors? Investors are pricing AI companies against a small set of outlier rounds that have grown extremely fast, which pulls the entire category’s comparable valuations upward. In India, AI and deep tech startups now command premiums of 40 percent or more over similar non-AI companies, while in the US, AI absorbed 58 percent of all Series D capital in 2025.
What happened to companies that raised at peak 2021 valuations? Many are facing valuation resets as they return to raise follow-on capital, since the metrics that justified 2021-era pricing have not kept pace with the valuation itself. BYJU’S is the starkest example, falling from a $22 billion peak to an estimated value under $2 billion, while other 2021-22 vintage startups have quietly accepted flat or down rounds to keep raising.
How does an IPO affect a startup’s valuation compared to its last private round? An IPO can reprice a company sharply in either direction once public market investors apply their own scrutiny to audited financials. Lenskart’s public market valuation climbed well past the $7 billion to $8 billion range its bankers had targeted just months before listing, showing that profitable, well-run companies can be undervalued by private markdowns.
Why are domestic investors becoming more important to Indian startup valuations? Domestic LPs and family offices participated in 22 percent of Indian startup deals in 2026, up from 14 percent in 2024, and they tend to underwrite valuations on more conservative, cash-flow focused terms than the global growth funds that priced many 2021-era rounds. This shift is gradually resetting what a defensible valuation looks like at every stage.
Is a Fair Market Value certificate the same as a defensible valuation? No. A Fair Market Value certificate from a registered valuer is a regulatory requirement under RBI and FEMA rules for rounds involving non-resident investors, and it documents a number rather than justifying it. A valuation only holds up in the next round if the underlying revenue and growth metrics support it independently of the certificate.
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