India’s VC ecosystem shifts to monetization-led growth in 2026, backed by AI, Q-commerce infra and domestic tailwinds: Bain

NEW DELHI: India’s venture capital and growth ecosystem is entering a monetization-led phase in 2026, with investors prioritizing capital efficiency, sustainable profitability and clear exit pathways over “growth at all costs”, according to the India Venture Capital Report 2026 by Bain & Company.

Bain expects deal activity to remain steady heading into 2026, with conviction strengthening across infrastructure-led and new-age themes. The report notes that investor behavior will be guided by firms that demonstrate durable unit economics, predictable revenue models and visible monetization outcomes. Capital markets-led IPO and secondary exits are also likely to continue, particularly from companies with a strong operating and execution track record, Bain said.

The report flags sharper sectoral bets as a key driver. In AI and generative AI, the shift is moving from experimentation to demonstrable ROI. Bain said platforms with differentiated data assets, proprietary models and deep technical talent will see momentum, supported by policy backing such as the government’s RDI fund. The RDI fund is a government fund supporting research and innovation in sunrise sectors, including deeptech, AI, biotech, and the digital economy.

VC firm Lightspeed said that in consumer AI, the biggest traction will come from use cases that enhance everyday experiences from creative expression and personalized content to AI-assisted learning and tools that make digital lifestyles more intuitive, according to the report. Blume Ventures added that India is well-positioned to sustain leadership in applied AI innovation, anchored by developer talent from its technology services legacy, though the focus must now shift to delivering economic value in a crowded vendor landscape.

Quick commerce is another area of focus. Bain said capital is increasingly flowing toward shared infrastructure platforms — dark stores, warehousing and delivery networks — which are lowering entry barriers for D2C brands. D2C refers to direct-to-consumer brands with majority revenue from online channels. Lightspeed said the outlook for verticalized quick commerce remains very strong, with continued innovation in backend infrastructure and expansion into broader consumer segments.

Clean energy is also expected to attract investment, driven by optimizing technology costs, policy tailwinds and expanding green financing instruments including thematic funds such as Green Frontier Capital, according to Bain.

On the macro side, Bain pointed to strong domestic tailwinds supporting the 2026 funding landscape amid global uncertainty. India’s GDP growth is estimated at ~7.5% for FY2026, anchored by public capex, resilient private consumption at ~60% of GDP, and robust services exports. Digital and financial inclusion is also expanding, with ~1 billion users and ~370 million 5G subscribers. However, Bain noted that rising protectionism and geopolitical tensions are increasing cost and capital volatility, partially offset by selective trade realignments and new bilateral agreements.

Bain said capital remains available, with several VC funds, including Golden Sparrow Ventures, Navam Capital and Dharana Capital, having recently raised or currently raising capital for deployment in 2026, signaling a fertile funding environment ahead. (ANI)