Indian startup funding dropped 27.2% month-on-month to $630 million in May 2026, compared with $865 million in April. The month’s tally relied heavily on Rapido’s $240 million round, while no other startup secured a $100 million-plus deal and only a few companies raised amounts below that threshold. Among the key transactions, Hyderabad-based spacetech startup Skyroot Aerospace became the first unicorn from India’s aerospace sector after a $60 million fundraise. IPO activity also stayed muted, with only Kissht debuting on the stock exchanges, while quick commerce firm Zepto received SEBI’s approval for its proposed public issue. The month also witnessed two major layoffs, with Innovaccer and Adda247 collectively letting go of around 540 employees.
According to data compiled by Entrackr, Indian startups raised approximately $630 million in funding during May. This amount included 12 growth and late-stage deals totaling $492 million, along with 51 early-stage deals worth $137 million. Additionally, there were 10 undisclosed deals during the month.
M-o-M and Y-o-Y trend
Month-on-month, startup funding declined 27% to its lowest level since July 2025, when the monthly tally fell below $600 million. On a year-on-year basis, funding dropped 45%, making May 2026 the weakest month for startup funding in the past six years.
Top growth-stage deals
In May 2026, growth and late-stage funding activity was dominated by mobility platform Rapido, which raised $240 million in a Series F round. Fintech startup Scapia secured $63 million, while spacetech firm Skyroot Aerospace became India’s first aerospace unicorn after raising $60 million. Edtech platform upGrad brought in $38 million, and home services startup Pronto raised $20 million. Climate-focused NBFC Ecofy secured $15 million in debt financing, while StrainX Bioworks, Wingreens, and Anveshan raised between $12.7 million and $13 million each. Country Delight rounded off the list with a $7 million debt raise.
Top early-stage deals
In May 2026, early-stage funding was led by B2B e-commerce platform Fairdeal.Market, which raised $15 million. Semiconductor startups remained a key theme, with HrdWyr securing $13 million and BigEndian Semiconductor raising $6 million. AI-focused ventures also attracted investor interest, as Human Archive raised $8.2 million and entertainment startup Mythik secured $5 million. Manufacturing startups Tiea Connectors and Mekr raised $8 million and $7 million respectively, while robotics firm ANSCER Robotics brought in $5.4 million. Home services platform Yes Madam secured $5.2 million, and skincare brand Chosen rounded off the list with a $5 million funding round.
Mergers and Acquisitions
Acquisition activity spanned fintech, AI, healthtech, consumer brands, and travel and reflected strategic expansion across sectors. Among the key deals, InMobi acquired MobileAction to bolster its AI and mobile growth capabilities, while Netradyne bought Moove to strengthen its AI portfolio. Fintech saw continued consolidation as Freo acquired IndiaLends and Oxyzo moved to acquire GoldenPi. In consumer brands, Emami acquired a 60% stake in InCut Digital, while Wingreens bought Safe Harvest. Healthtech remained active as Innovaccer acquired CaduceusHealth and Vaidam Health acquired CancerRounds.
City and segment-wise deals
Bengaluru led startup funding in May 2026 with $411.14 million across 35 deals and accounted for 65.26% of the total capital raised. Mumbai followed at $71.01 million (11.27%) from 11 deals, while Hyderabad secured $60.4 million (9.59%) through two deals. Delhi-NCR recorded 15 deals worth $44.88 million (7.12%), while Chennai registered four deals worth $6.2 million (0.98%).
Fintech led funding in May 2026 with $97.2 million, accounting for 15.43% of the total capital across 10 deals. E-commerce followed with 13 deals that raised $43.44 million (6.89%), while AI recorded 11 deals worth $26.1 million (4.14%). F&B saw 5 deals that brought in $20.41 million (3.24%), whereas SaaS accounted for 5 deals worth $5.82 million (0.92%).
Series-wise deals
Funding activity in May 2026 continued to favor early and mid-stage rounds, led by Series A, which brought in $73.62 million across 12 deals. Series B followed with $45.7 million from 3 deals, while Seed rounds accounted for 21 deals that raised $39.36 million. Pre-Series A recorded 10 deals worth $18.92 million, and Pre-Seed rounds remained modest with 16 deals contributing $5.2 million.
​​Layoffs, shutdowns and departures
Layoffs picked up in May 2026 as four startups, including Innovaccer, Adda247, Pocket FM, and Apna Mart, reduced their workforce. Collectively, these companies let go of around 680 employees during the month.
The ecosystem also witnessed one shutdown after spiritual app DevDham ceased operations.
Leadership churn remained active across the startup landscape. Notable exits included Ujjwal Jain from Share.Market, Pawan Gupta from Fashinza, Sumit Gwalani from Fi Money, Sumit Jain from Unacademy, and Anurag Sharma from Pocket FM, among others, taking the total number of senior-level departures to 12. During the same period, startups recorded 32 key leadership appointments.
Trends
Layoffs returned after a brief slowdown: Workforce reductions accelerated in May as four startups collectively laid off around 680 employees, a sharp increase from April’s two layoff instances affecting about 120 employees. The rise signals renewed pressure on startups to improve efficiency and manage costs.
No ESOP buyback: According to data compiled by Entrackr, seven startups have collectively bought back ESOPs worth nearly $220 million in Q1 2026. But April and May saw no new buybacks.
SC upholds 28% GST on online gaming: The Supreme Court upheld the government’s retrospective 28% GST levy on online gaming and ruled that once money is staked, the distinction between games of skill and chance is irrelevant for taxation. The verdict validates tax demands exceeding Rs 1 lakh crore and deals a major setback to gaming firms that sought GST only on platform fees.
Physical AI: Physical AI became a major talking point in May, with Pronto, Snabbit, and Urban Company’s InstaHelp at the center of the discussion. Snabbit and Urban Company, however, distanced themselves from claims around Physical AI-driven home service rollouts.
Conclusion:
May 2026 reflected a challenging environment for Indian startups, with funding falling to its lowest level in nearly a year despite a few large transactions. Rapido’s $240 million round contributed a substantial portion of the month’s capital, while most startups raised relatively modest amounts. Investor interest remained visible in sectors such as spacetech, semiconductors, AI, and fintech, demonstrating continued appetite for technology-driven businesses. Bengaluru retained its position as the leading startup hub, and acquisition activity remained active across fintech, consumer brands, healthtech, and AI. However, rising layoffs, the absence of ESOP buybacks, limited IPO activity, and continued leadership exits pointed to a more cautious operating environment. The month also witnessed discussions around Physical AI and a major regulatory development in online gaming following the Supreme Court’s GST verdict. Overall, May reflected selective capital deployment as investors prioritized quality and scale over aggressive funding activity.
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