India Expands Startup Framework to Boost Deep Tech Innovation
The Indian government is making significant changes to its startup framework aimed at nurturing deep tech companies, which typically require longer development cycles than conventional startups. This initiative focuses on sectors like space, semiconductors, and biotechnology, addressing the unique challenges faced by these innovative businesses.
Key Updates in the Startup Framework
This week, the government announced an extension of the startup designation for deep tech companies to 20 years, allowing them additional time to mature and achieve commercial viability. Furthermore, the revenue threshold for accessing startup-specific benefits has been increased from ₹1 billion (approximately $11 million) to ₹3 billion (around $33 million). These policy updates are designed to better align with the extended timelines common in science and engineering fields.
Building a Long-Horizon Ecosystem
These changes are part of a broader effort by New Delhi to cultivate a robust deep tech ecosystem. A notable initiative is the ₹1 trillion (about $11 billion) Research, Development, and Innovation Fund (RDI), established last year to facilitate patient financing for research-oriented companies. In conjunction with this, a coalition titled the India Deep Tech Alliance has been launched, backed by prominent venture firms like Accel and Qualcomm Ventures. This coalition aims to mobilize over $1 billion in private investment, highlighting growing interest in India’s deep technology landscape.
Smoothing the Path for Founders
The revised regulations address challenges previously faced by startups, including a premature loss of their “startup” label while still in development. Vishesh Rajaram, founding partner at Speciale Invest, noted that this often created a misleading signal of failure for science-based companies. By formally recognizing the distinct nature of deep tech, these policy reforms could ease the fundraising process and improve interactions with government entities.
Challenges in Accessing Funding
Despite these positive changes, investors remain cautious about funding availability beyond initial rounds. Rajaram pointed out that traditional gaps persist, especially for capital-intensive deep tech startups at the Series A stage and beyond. The RDI Fund aims to fill this gap by routing public capital through venture funds and providing grants to support early-stage and growth-phase companies.
Operationalizing the RDI Fund
Siddarth Pai, co-chair of regulatory affairs at the Indian Venture and Alternate Capital Association, indicated that the RDI Fund is starting to take shape operationally, with fund managers being appointed. Unlike conventional fund-of-funds, this initiative will also offer direct investments and support to deep tech startups, aiming to be a nucleus for more significant capital formation in the sector.
The Growing Landscape of Deep Tech Funding in India
As of now, Indian deep tech startups have attracted around $8.54 billion in total investments. Although this figure remains modest compared to other markets, recent data from Tracxn suggests a resurgence in funding, with deep tech startups raising $1.65 billion in 2025, a notable rebound from previous years. This recovery signals increased confidence from investors, primarily in sectors aligned with national objectives like advanced manufacturing and climate technologies.
Signals of Long-Term Commitment
For international investors, India’s updated framework is perceived as a strong signal of long-term policy direction. Pratik Agarwal of Accel explained that deep tech investments typically span seven to twelve years. This extended recognition enhances confidence among investors, who now believe that the regulatory environment will remain stable throughout the investment lifecycle. While this adjustment won’t produce immediate changes, it does indicate a shift towards more sustainable, long-term investment strategies.
Conclusion: A Path Forward for Indian Deep Tech
As India works to establish a competitive edge in the global deep tech landscape, the effectiveness of these reforms will ultimately hinge on the emergence of world-class deep tech companies. Success in this area will not only validate the government’s efforts but also test the robustness of the ecosystem being developed. The next decade may hold the key to whether India can showcase a critical mass of internationally competitive deep tech firms, marking a significant milestone for its innovation journey.
