India has updated its startup framework to better support deep tech companies in sectors such as space, semiconductors, and biotechnology (07/02).

The changes double the period during which these firms are classified as startups to 20 years and raise the revenue threshold for startup-specific tax, grant, and regulatory benefits to ₹3 billion (around $33.12 million), up from ₹1 billion previously.

The revised policy is aimed at aligning government support with the long development cycles typical of science- and engineering-led businesses, which often take years to reach commercialization.

Public Capital Mobilized to Support Long-Horizon Innovation

The policy revision is part of a broader effort by New Delhi to build a deep tech ecosystem combining regulatory reform with public financing.

Central to this is the ₹1 trillion (around $11 billion) Research, Development and Innovation Fund (RDI) announced last year, which is designed to provide patient funding for science- and R&D-driven companies.

Alongside government support, U.S. and Indian venture firms have formed the India Deep Tech Alliance, a private investor coalition exceeding $1 billion.

Members include Accel, Blume Ventures, Celesta Capital, Premji Invest, Ideaspring Capital, Qualcomm Ventures, and Kalaari Capital, with Nvidia acting as an adviser.

Investors See Policy as Positive, but Funding Gaps Remain

Industry investors welcomed the policy, noting it resolves a previous “false failure signal” where startups risked losing status before commercializing products.

Vishesh Rajaram, founding partner at Speciale Invest, said, “By formally recognizing deep tech as different, the policy reduces friction in fundraising, follow-on capital, and engagement with the state, which absolutely shows up in a founder’s operating reality over time.”

However, investors also noted that funding beyond early-stage rounds remains a challenge. Rajaram stated, “The biggest gap has historically been funding depth at Series A and beyond, especially for capital-intensive deep tech companies.”

The RDI fund is intended to complement private investment by providing capital at early and growth stages without changing commercial investment criteria, according to Arun Kumar, managing partner at Celesta Capital.

India Deep Tech Funding Shows Early Signs of Recovery

Indian deep tech startups have raised $8.54 billion in total to date. Funding rebounded to $1.65 billion in 2025 from $1.1 billion in both 2023 and 2024, after peaking at $2 billion in 2022, according to Tracxn.

This growth reflects rising investor confidence in sectors aligned with national priorities such as advanced manufacturing, defence, climate technologies, and semiconductors.

Neha Singh, co-founder of Tracxn, said, “Overall, the pickup in funding suggests a gradual move toward longer-horizon investing.”

By comparison, U.S. deep tech startups raised about $147 billion in 2025, while China accounted for roughly $81 billion, highlighting the relative scale gap India continues to face.

Policy Change Signals Longer-Term Commitment to Deep Tech

Global investors interpret India’s framework revision as a signal of long-term policy support rather than an immediate incentive for capital allocation.

Pratik Agarwal, partner at Accel, said, “Deep tech companies operate on seven- to twelve-year horizons, so regulatory recognition that stretches the lifecycle gives investors greater confidence that the policy environment will not change mid-journey.”

While the changes may not immediately alter investment patterns, they strengthen the case for building and scaling deep tech companies in India.

Arun Kumar of Celesta Capital added that the real benchmark will be the emergence of globally competitive Indian deep tech firms over the next decade.

PHOTO: UNSPLASH

This article was created with AI assistance.

We make every effort to ensure the accuracy of our content, some information may be incorrect or outdated. Please let us know of any corrections at [email protected].