Deep tech startups in sectors such as space, semiconductors and biotech take much longer to mature than conventional businesses. Because of this, India is tweaking its startup rules and mobilizing public capital in hopes of helping more of it get to commercial products.
This week, the Indian government updated its startup framework, doubling the time for deep-tech companies to be considered startups to 20 years and raising the income threshold for startup-specific tax, grant and regulatory benefits to ₹3 billion (about US$33.12 million), from ₹1 billion (about US$11.04 million) previously. The goal of the change is to align policy timelines with the long development cycles typical of science and engineering-led businesses.
The change is also part of New Delhi’s drive to build a deep technology ecosystem with a long horizon by combining regulatory reform with public capital, including a ₹1 trillion (around US$11 billion) research, development and innovation (RDI) fund announced last year. This fund is intended to expand patient funding for science-led and R&D companies. In this context, US and Indian venture firms later joined to form the India Deep Tech Alliance, a $1 billion coalition of private investors that includes Accel, Blume Ventures, Celesta Capital, Premji Invest, Ideaspring Capital, Qualcomm Ventures and Kalaari Capital, with chip maker Nvidia acting as an adviser.
For founders, these changes can fix what some see as an artificial pressure point. Under the previous framework, companies often risked losing startup status before commercial sale, creating a “false signal of failure” that judged science-led ventures by policy timelines rather than technological progress, said Vishesh Rajaram, founding partner at Speciale Invest, an Indian deep-tech venture capital firm.
“By formally recognizing deep tech as distinct, this policy reduces friction in fundraising, follow-on capital and engagement with the state, which absolutely translates into the operational reality of the founder over time,” Rajaram told TechCrunch.
Still, investors say access to capital remains a more binding constraint, especially beyond the early stages. “Historically, the biggest gap has been the depth of funding in Series A and beyond, especially for capital-intensive deep technology companies,” Rajaram said. It is there that the former government RDI fund is to play a complementary role.
“The real benefit of the RDI framework is to increase the funding available to early and growth stage deep technology companies,” said Arun Kumar, Managing Partner at Celesta Capital. By channeling public capital through venture funds with a tenor similar to private equity, he said, the fund is designed to address chronic gaps in follow-on financing without changing the commercial criteria that guide private investment decisions.
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Siddarth Pai, founding partner at 3one4 Capital and co-chair of regulatory affairs at the Indian Venture and Alternate Capital Association, said India’s deep tech framework avoids the “graduation” that has historically cut companies off from support just as they scale.
These policy changes come as the RDI fund begins to take shape operationally, Pai said, with the first group of fund managers identified and the selection process of venture and private equity managers underway.
While deep tech private equity already exists in India — particularly in areas like biotech — Pai told TechCrunch that the RDI Fund is meant to act as a nucleus around which more capital formation can happen. Unlike a traditional fund of funds, he noted, the vehicle is also designed to take direct positions and provide loans and grants to deep-tech startups.
India’s deep tech funding is on the rise
In terms of scale, India remains an emerging rather than a dominant deep-tech market. India’s deep tech startups have raised a total of $8.54 billion to date, but recent data points to renewed momentum. Indian deep tech startups have raised $1.65 billion in 2025, a sharp increase from $1.1 billion in each of the previous two years, after funding peaked at $2 billion in 2022 on Tracxn. The recovery suggests growing investor confidence, particularly in areas aligned with national priorities such as advanced manufacturing, defense, climate technology and semiconductors.
“Overall, the increase in funding indicates a gradual shift towards investing with a longer horizon,” said Neha Singh, co-founder of Tracxn.
By comparison, US deep-tech startups raised about $147 billion in 2025, more than 80 times the amount raised in India that year, while China accounted for about $81 billion, data from Tracxn show.
The difference highlights the challenge India faces in building capital-intensive technologies, even with abundant engineering talent. So we hope that these moves by the Indian government will lead to more investor participation in the medium term.
A longer term signal
For global investors, the change in New Delhi’s framework is seen more as a signal of longer-term policy intent than as a trigger for immediate shifts in allocation. “Deep tech companies operate on a seven-to-twelve-year horizon, so regulatory recognition that extends the lifecycle gives investors more confidence that the policy environment won’t change midway,” said Pratik Agarwal, partner at Accel. While he said the change would not change allocation models overnight or completely remove political risk, it increased investors’ comfort that India was thinking about deep tech in the longer term.
“The change shows that India is learning from the US and Europe how to create patient frameworks for building borders,” Agarwal told TechCrunch.
Whether the move will reduce the tendency of Indian startups to shift their headquarters overseas as they expand remains an open question.
The extended runway strengthens the case for building and staying in India, Agarwal said, although access to capital and customers still matter. Over the past five years, he added, India’s public markets have shown increasing interest in venture-backed technology companies, making domestic listings more credible than in the past. That, in turn, could ease some of the pressure on deep-tech founders to incorporate overseas, although access to buy-in and late-stage capital will continue to shape where companies eventually scale.
For long-term technology investors, the ultimate test will be whether India can deliver globally competitive results. The real signal, Celesta Capital’s Kumar said, would be the emergence of a critical mass of Indian deep-tech companies that would succeed on the world stage.
“It would be great to see ten globally competitive deep tech companies from India achieving sustained success over the next decade,” he said, describing that as a benchmark he will look for when assessing whether India’s deep tech ecosystem is maturing.