Thu Oct 02 23:39:00 UTC 2025: **Summary:**

Private Equity and Venture Capital (PE-VC) investment in Tamil Nadu, India saw a significant drop in the third quarter of 2025, totaling $126 million across 11 deals compared to $728 million across 11 deals in the same period in 2024. This decline is attributed to uncertainties in the market, particularly the impact of Artificial Intelligence (AI) on SaaS firms which were previously a popular investment target. National level PE-VC investments have also declined by 26%. SpaceTech, DeepTech, and defence-related start-ups are currently attracting more attention from investors.

**News Article:**

**Tamil Nadu Sees Sharp Drop in PE-VC Investment in Q3 2025**

**CHENNAI, October 3, 2025** – Private Equity and Venture Capital (PE-VC) investment in Tamil Nadu experienced a dramatic decline in the third quarter of 2025, according to data released by Venture Intelligence. The state attracted $126 million across 11 deals between July and September, a stark contrast to the $728 million invested across 11 deals during the same period in 2024.

The decrease reflects a broader trend of caution among investors, both in Tamil Nadu and nationally. At the national level, PE-VC firms invested $5.67 billion across 299 deals in the third quarter of 2025, representing a 26% drop compared to $7.63 billion across 339 deals in 2024.

“Investors have raised enough money, and there is more money in the system. But there are a lot of uncertainties,” explained Arun Natarajan, founder and managing director of Venture Intelligence. He pointed to the impact of Artificial Intelligence (AI) on SaaS (Software as a Service) firms, which were previously a favored sector for investment. “Earlier, investors were betting on SaaS firms. But now, SaaS firms are impacted because of AI, and if the SaaS sector is affected, Chennai is automatically impacted.”

While overall investment is down, certain sectors are bucking the trend. Natarajan noted that “SpaceTech and DeepTech firms are doing quite well,” adding that “Drone and defence-related start-ups are getting attention.”

Despite the overall downturn, there were notable deals, including a $72 million investment by Westbridge Capital in Kovai Pazhamudir Nilayam. However, angel investments also saw a dip, with only six deals in the quarter compared to 11 in Q3 2024.

The slowdown in PE-VC investment raises concerns about the growth prospects of Tamil Nadu’s startup ecosystem, particularly in sectors reliant on external funding. Industry analysts will be closely watching to see if the shift towards SpaceTech, DeepTech, and defence-related startups will offset the decline in traditional sectors.

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