From frenzy to fundamentals, how AI is resetting startup funding in 2026

India's startup ecosystem is moving beyond digitisation, with investors increasingly prioritising foundational technology, research-driven innovation and long-term capability building.

After years of capital chasing scale and speed, India’s startup funding ecosystem is entering a more deliberate phase. In 2026, investors are expected to recalibrate portfolios around Artificial Intelligence (AI)–led and capability-driven businesses, as India moves beyond pure digitisation into foundational technology, deep tech and research-backed innovation. Policy alignment with private capital, improving IPO-led exit visibility and a sharper focus on capital efficiency are together reshaping where money flows—favouring patient, technology-first bets over crowded, scale-at-any-cost consumer plays.

Speaking to Business Today, Rahul Chowdhri, Partner at Stellaris Venture Partners, which is deploying capital from its $300-million Fund III, says that AI is fundamentally reshaping cost structures, speed of execution and business models, enabling outcome-driven businesses to be built in a far more capital-efficient manner.

“We’re bullish on AI-native startups across both enterprise and consumer markets,” he said, adding that Voice AI is another area of strong interest. India is a voice-heavy market, and the opportunity to deploy voice-led AI solutions in sectors with large profit pools and clear revenue uplift is significant.

India’s startup ecosystem is moving beyond digitisation, with investors increasingly prioritising foundational technology, research-driven innovation and long-term capability building. Even as debate continues around a potential AI bubble, investments in AI-led startups show little sign of slowing.

According to Vipul Patel, Partner, Seed Investing, IIMA Ventures, the startup funding landscape in 2026 will be shaped by a clear shift toward technology-led and capability-driven growth. Sectors likely to see strong funding growth in 2026 include deep technology, artificial intelligence, enterprise software, space technology, defence and aerospace, robotics, and advanced manufacturing. These areas already show early technical validation and are benefiting from policy support, increasing talent participation, and improved access to risk capital.
 
“Overall, capital will increasingly move toward sectors where technology creates durable advantage and long-term value,” he asserts.
 
AI concentration is a significant capital driver, says Adrija Aggarwal, founder, Sattva Ventures. From AI-driven automation to AI infrastructure, AI-enabled consumer tech etc - all are poised for funding growth in 2026.

But which sectors are likely to see contraction? According to Agarwal, D2C brands - especially undifferentiated, capital-intensive models with weak unit economics and limited defensibility - are likely to face pressure. Traditional IT services may also see consolidation, as AI-led automation and reduced reliance on labour-intensive service models put margins under strain.

AI may remain the dominant force attracting capital, but the winners will be those building defensible technology, aligned with policy priorities and realistic timelines to scale and exits.