Deep tech startups in fields such as space, semiconductors, and biotechnology take much longer to mature than traditional ventures. That’s why India is adjusting its startup rules and mobilizing public capital to help more people build commercial products.
This week, the Indian government updated its startup framework, doubling the period for which deeptech companies are considered startups to 20 years and raising the revenue threshold for startup-specific tax, subsidy and regulatory benefits to 3 billion rupees (about $33.12 million) from the previous 1 billion rupees (about $11.04 million). These changes aim to align policy timelines with the long development cycles typical of science- and engineering-focused companies.
The changes are also part of New Delhi’s efforts to build a long-term deep technology ecosystem through a combination of regulatory reforms and public capital, including a 1 trillion rupees (about $11 billion) Research, Development and Innovation Fund (RDI) announced last year. This fund is intended to expand patient financing for science-led and R&D-focused companies. Against this backdrop, US and Indian venture firms later came together to launch the India Deep Tech Alliance, a $1 billion coalition of private investors that included Accel, Blume Ventures, Celesta Capital, Premji Invest, Ideaspring Capital, Qualcomm Ventures and Kalaari Capital, with chipmaker Nvidia serving as an advisor.
For founders, these changes could solve what some see as artificial pressure points. The previous framework risked companies losing startup status while they were still pre-commercial, creating a “false failure signal” that judged science-led ventures based on policy timelines rather than technological progress, said Vishesh Rajaram, founding partner at Speciale Invest, a deep tech venture capital firm in India.
“By formally recognizing deep tech as different, this policy reduces friction in funding, follow-on capital and state participation, which absolutely manifests itself in the operating reality of founders over time,” Rajaram told TechCrunch.
Nonetheless, investors say access to capital remains a more binding constraint, especially after the initial stages. “Historically, the biggest gap has been funding depth beyond Series A, especially for capital-intensive deep tech companies,” Rajaram said. This is where the government’s initial RDI funds were intended to play a complementary role.
“The real benefit of the RDI framework is that it increases the funding available to deep tech companies in their seed and growth stages,” said Arun Kumar, Managing Partner at Celesta Capital. By routing public capital through venture funds with a similar tenor as private capital, it is designed to address chronic gaps in follow-on financing without changing the commercial criteria that govern private investment decisions, he said.
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Siddarth Pai, founding partner at 3one4 Capital and co-chairman of regulatory affairs at the Indian Venture and Alternate Capital Association, said India’s deep tech framework avoids the “graduation cliff” that has historically cut off support as companies grow in size.
This policy change comes as the RDI fund begins to take operational shape, the first fund manager is identified and the process of selecting venture and private equity managers progresses, Pai said.
Although private capital for deep tech already exists in India (particularly in areas like biotech), Pai told TechCrunch that the RDI fund is intended to be a key player around which greater capital formation can occur. He said that unlike traditional funds of funds, this vehicle is designed to take direct positions and provide credit and grants to deep tech startups.
India’s deep tech funding increases
In terms of size, India remains an emerging market rather than a dominant deep tech market. Deep tech startups in India have raised a total of $8.54 billion to date, but recent data shows renewed momentum. Deep tech startups in India raised $1.65 billion in 2025, a sharp rebound from $1.1 billion in each of the previous two years, after funding peaked at $2 billion in 2022, according to Tracxn. This recovery signals increased investor confidence, particularly in sectors aligned with national priorities such as advanced manufacturing, defence, climate technology and semiconductors.
“Overall, the increase in funding signals a gradual move towards long-term investments,” said Neha Singh, co-founder of Tracxn.
By comparison, U.S. deeptech startups raised about $147 billion in 2025, more than 80 times the amount distributed in India that year, with China accounting for about $81 billion, according to data from Tracxn.
This gap highlights the challenges India faces in building capital-intensive technologies despite its wealth of engineering talent. Therefore, there is hope that this move by the Indian government will lead to greater investor participation in the medium term.
long term signal
For global investors, New Delhi’s framework changes are being read as a signal of long-term policy intentions rather than triggering an immediate shift in allocations. “Deep tech companies operate over 7-12 year horizons, so regulatory awareness that extends their life cycles gives investors confidence that the policy environment will not change in the interim,” said Pratik Agarwal, partner at Accel. He said the changes would not change the allocation model overnight or completely remove policy risk, but it increased investor comfort that India was thinking about deep tech from a longer-term perspective.
“These changes show that India is learning from the US and Europe how to create a patient framework for building frontiers,” Agarwal told TechCrunch.
Whether the move will reduce the tendency of Indian startups to move their headquarters overseas as they scale remains an open question.
Agarwal said the expanded runway strengthens the case for building and staying in India. But access to capital and customers remains important. He added that interest in venture-backed technology companies has been growing in India’s public markets over the past five years, making domestic listings a more credible option than in the past. This could alleviate some of the pressure on deep tech startups to expand overseas, even as procurement and access to late-stage capital continue to shape the areas where companies can ultimately scale.
The ultimate test for investors supporting long-haul technologies will be whether India can deliver globally competitive results. Kumar of Celesta Capital said the real signal will be the emergence of a critical mass of Indian deep tech companies succeeding on the global stage.
“It would be great to see India’s 10 globally competitive deeptech companies achieve continued success over the next decade,” he said, explaining that it would serve as a benchmark when assessing whether India’s deeptech ecosystem is maturing.
