Escalating tensions in West Asia are starting to delay fresh capital commitments into India-focused venture funds, with investors adopting a wait-and-watch approach, experts told Mint.
At least one early-stage venture capital firm has lost a $3 million commitment from a West Asia-based limited partner after receiving a term sheet, its managing partner said, requesting anonymity because the discussions were private.
“It was expected to be routed in the first week of March but at the last moment, the investment was cancelled,” the managing partner said. The investor cited the evolving geopolitical situation as the reason for pulling back.
West Asia has become an increasingly important source of funding for Indian venture firms, especially over the past two years. A McKinsey survey of 50 global LPs in March showed West Asia investors allotted 20-30% of their portfolios to India, making them among the more active allocators to the market, even as European LPs continued to have the highest exposure, apart from North America.
Ben Powell, chief investment strategist at BlackRock Investment Institute, said sovereign investors in the region will prioritize domestic deployment during periods of heightened uncertainty.
“The sovereign in the GCC (Gulf Cooperation Council) region will increasingly invest more domestically, focusing on internal priorities,” Powell said.
Queries sent to major sovereign wealth funds Mubadala Investment Company in Abu Dhabi, Public Investment Fund in Saudi Arabia, Abu Dhabi Investment Authority and Qatar Investment Authority last week did not elicit a response at the time of publishing.
The slowdown can come as a rude shock for India-focused funds after 123 of them raised a record $23.2 billion in 2025, according to a March report by Ernst & Young. In February alone, 14 funds raised $2.6 billion—more than double the $1.2 billion recorded a year earlier. While the data for March has not been compiled, there were no large fund PE or VC closures last month.
Delayed decisions
As the Iran war stepped into its fifth week, there was a clear delay in decision-making.
“Everything is getting pushed back. Even funds currently raising capital are keeping their rounds open for longer,” said the co-head of regional investments at an advisory firm with active clients running over $300 billion. The question, he said is: “If I have additional capital to deploy, do I need to commit it immediately or can I wait a month or two?”
Several funds remain in the market despite the emerging uncertainty. Among them, ValueQuest Tristar hit first close, Waterbridge Ventures is in the market, and Lightspeed India is likely to begin fundraising towards the end of this year. Investors are reassessing the timing of deployments rather than backing away entirely.
So far, existing commitments remain largely intact, the co-head quoted without name earlier said, adding that the current environment is “more of a near-term disruption than a structural change.”
The stock market volatility triggered by the West Asia war has pushed companies including Curefoods, Turtlemint and Inframarket, among others, to reassess their timelines for initial public offerings, Mint reported earlier.
Powell of Blackrock also alluded to valuations coming under pressure and higher global interest rates leading to a repricing of risk assets.
“A higher cost of capital is leading to a short-term repricing,” Powell said, adding that the current stress is not systemic.
The advisory co-head was of the view that if the conflict continues for an extended period, fundraising is likely to get impacted severely.
“If oil prices remain above $100 per barrel, then this could turn structural,” he said.