Startups navigate tougher IPO landscape with funding strategies led by insiders

Tech startups are relying more on existing investors for new funding, using bridge financing and unpriced structures to buy time as late-stage private funding becomes more selective and public market investors scrutinize valuations.

Private equity and venture capital investment, led by current backers of Indian tech companies, rose to $4.05 billion through 183 deals in July 2025-June 2026. That’s nearly double the $2.24 billion recorded the previous year, according to Venture Intelligence data shared with Mint.

In the same period, total funding across stages was approximately $18 billion, according to Tracxn data.

While capital continues to flow into Indian startups, investors say fresh external funding is becoming more selective, especially late-stage.

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Startups are gradually using insider rounds, bridge funding and unpriced structures to extend runway while delaying new price discovery, experts said. Mint.

Global investment bank Houlihan Lokey said in a report published last month that growth and late-stage companies have been using bridge financing — including Temasek’s $24 million investment in Atomberg in December, CoinDCX’s backing from Coinbase Ventures in October and Accel’s $47 million investment in CityMall in September — to extend runway and delay broader valuation resets.

Bankers and investors noted that a more cautious domestic public market is driving the trend.

Companies that raise capital at elevated private valuations risk sharp valuation swings when they eventually list, prompting many to favor bridge financing and convertible structures over accepting a lower-priced offer.

“As traditional funding channels become selective and new alternative channels emerge, founders are relying on extensions, convertibles and structured bridges to extend runway, maintain momentum and manage market volatility and valuation corrections,” said spokesman Houlihan Lokey.

Last month, waste management technology platform Recykal raised $23 million in a bridge round comprising a mix of primary and secondary capital led by existing investors.

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Round sizes are getting bigger

The average size of funding led by insiders also increased. Data from Venture Intelligence showed that the average size of Series F and later-stage rounds led by existing investors rose to $114 million between July 2025 and June 2026, from $63 million in the same period a year earlier.

Average deal size in Series D rounds increased to $23 million from $13 million.

“Over the last 18-24 months, there has been a clear change in IPO pricing dynamics. Public market investors, especially domestic mutual funds, have become much more disciplined in pricing IPOs,” said Pranay Jain, managing director of digital, technology and consumer investment banking at Avendus Capital.

Jain said uncertainty over IPO valuations in 12-24 months has made investors cautious, although deal flow remains strong. He noted that muted public markets in 2023-24 still carried expectations of an eventual valuation recovery. However, external shocks combined with tighter public market pricing have now pushed startups back to unpriced and convertible deal structures.

Mint reported in July 2024 that startups were increasingly relying on bridge financing as venture funding dried up and companies struggled to stretch cash raised during the funding boom.

As the public markets reopened, many late-stage companies focused on IPOs. However, increased pricing scrutiny has made it more difficult to find a new price.

“The combination of lower private market valuations and more disciplined public market valuations has brought unpriced bikes and convertibles into the spotlight,” Jain said.

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The cycle developed, it did not repeat itself

Unlike the funding slowdown in 2023-24, the current environment is not defined by a lack of capital, but by greater price discipline and macro uncertainty.

Other macro concerns such as rupee depreciation, inflationary pressures, fuel prices and broader geopolitical developments have added to this caution, Jain added.

“Startups that are raising have bigger rounds than before and naturally, it takes more time to build a bigger round. So that the growth of the startup is not disrupted while this process is happening, existing investors often step in to support them,” said Ankur Mittal, co-founder of Inflection Point Ventures.

“We’d rather structure it as an unpriced convertible rather than set a valuation at this stage.”

Mittal believes that insider-led rounds don’t necessarily signal stress. “When existing investors back a company before a pricing round, it reflects real confidence from the people who know the business best.”

Key things

Insider-led PE/VC investments in Indian tech companies nearly doubled to $4.05 billion.
Bridge funding and unpriced rounds help start-ups delay re-valuation resets.
Insider-led Series F+ rounds jumped to an average of $114 million.
Public market investors are much more disciplined when it comes to valuing an IPO.
Investors say insider-led rounds signal genuine confidence, not anxiety, among late-stage startups.