Deep-tech startups in fields such as aerospace, semiconductors, and biotech take much longer to mature than conventional businesses. Because of this, India is adjusting startup rules and mobilizing public capital, hoping to help more of them reach commercial products.
This week, the Indian Govt updated its startup framework, doubling the period in which deep-tech companies are treated as startups to 20 years and raising the revenue threshold for special tax, grant and regulatory benefits for a startup to ₹3 billion (about $33.12 million), from ₹1 billion (about $11.04 million) previously. The change aims to align policy timelines with the long development cycles that characterize science and engineering-led businesses.
The change is also part of New Delhi’s effort to build a long-term deep-tech ecosystem by combining regulatory reform with public capital, including the ₹1 trillion (about $11 billion) Research, Development and Innovation (RDI) Fund announced last year. This fund is intended to expand patient funding for companies leading science and research and development. In this context, US and Indian venture firms later joined to launch the India Deep Tech Alliance, a $1 billion consortium of private investors that includes Accel, Blume Ventures, Celesta Capital, Premji Invest, Ideaspring Capital, Qualcomm Ventures and Kalaari Capital, with chipmaker anvi as an active advisor.
For founders, these changes may fix what some see as an artificial pressure point. Under the previous framework, companies often risked losing start-up status while still pre-commercial, creating a “false signal of failure” that judged scientific ventures on 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 different, the policy reduces friction in fundraising, trailing capital, and engagement with the state, which absolutely shows up in a founder’s operating reality over time,” Rajaram told TechCrunch.
But investors say access to capital remains a more binding constraint, particularly beyond the early stages. “The biggest gap has historically been the depth of funding at Series A and beyond, especially for capital-intensive deep technology companies,” said Rajaram. That’s where the government used to be R&D Fund intended to play a complementary role.
“The real benefit of the R&D framework is to increase the funding available to deep-tech companies in the early and growth stages,” said Arun Kumar, managing partner of Celesta Capital. By channeling public capital through venture capital on terms similar to private equity, he said, the fund is designed to address chronic gaps in subsequent funding without changing the commercial criteria that drive 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 context avoids a “graduation cliff” 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 batch of fund managers identified and the selection process of venture and private equity managers underway.
While private capital for deep tech already exists in India — particularly in areas like biotech — Pai told TechCrunch that the RDI Fund is intended to act as a nucleus around which larger capital formation can emerge. Unlike a traditional fund-of-funds, he noted, the vehicle is also designed to take direct positions and provide credit 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. Indian deep-tech startups have raised a total of $8.54 billion to date, but recent figures show renewed momentum. Indian deep-tech startups 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. The recovery indicates growing investor confidence, particularly in sectors aligned with national priorities such as advanced manufacturing, defense, climate technologies and semiconductors.
“Overall, the recovery in funding indicates a gradual move towards longer-term investments,” 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, according to Tracxn data.
The difference highlights the challenge India faces in manufacturing capital-intensive technologies, even with its wealth of engineering talent. So the hope is that these moves by the Indian government will lead to greater investor participation in the medium term.
A long term signal
For global investors, New Delhi’s change of context is seen as a signal of long-term political intent rather than a trigger for immediate changes in allocation. “Deep tech companies operate on seven-to-twelve-year horizons, so regulatory recognition that extends the lifecycle gives investors more confidence that the policy environment won’t change mid-journey,” said Pratik Agarwal, partner at Accel. While he said the shift would not change allocation models overnight or completely eliminate policy risk, it increased investor comfort that India is thinking about deep tech over longer time horizons.
“The change shows that India is learning from the US and Europe how to create patient frameworks for border construction,” Agarwal told TechCrunch.
Whether the move will reduce the propensity of Indian startups to relocate their headquarters abroad as they scale remains an open question.
The extended runway strengthens the case for manufacturing and accommodation 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 a growing appetite for venture-backed technology companies, making domestic listings a more credible option than in the past. That, in turn, could ease some of the pressure on deep-tech founders to incorporate overseas, even if access to funding and later-stage capital will continue to shape where companies eventually scale.
For investors backing long-term technologies, the ultimate test will be whether India can deliver competitive results globally. The real signal, Celesta Capital’s Kumar said, would be the emergence of a critical mass of Indian deep-tech companies succeeding on the global stage.
“It would be great to see ten globally competitive deep-tech companies from India achieve consistent success over the next decade,” he said, describing that as a benchmark he would look for to assess whether India’s deep-tech ecosystem is maturing.
