India is overhauling its framework for deep tech startups, aiming to foster innovation in sectors like artificial intelligence, biotechnology, and space technology. The government’s move, announced this week, extends the period for which companies are recognized as startups to 20 years – double the previous 10-year window – and raises the revenue threshold for benefits to ₹3 billion (approximately $33.12 million) from ₹1 billion (around $11.04 million). This policy shift acknowledges the longer development cycles and higher capital needs inherent in deep tech ventures.
The changes are part of a broader effort to build a robust deep tech ecosystem in India, combining regulatory reforms with significant public capital. Last year, the government announced a ₹1 trillion (around $11 billion) Research, Development and Innovation (RDI) Fund to provide patient financing for science-led and R&D-driven companies. Complementing this, the India Deep Tech Alliance, a coalition of investors with over $1 billion in private capital, was launched, including firms like Accel, Blume Ventures, and Celesta Capital, with Nvidia acting as an advisor.
Previously, deep tech companies often risked losing their startup status – and the associated benefits like tax exemptions, fast-track IP support, and regulatory relief – before achieving commercial viability. This created what Vishesh Rajaram, founding partner at Speciale Invest, described as a “false failure signal,” judging these ventures on policy timelines rather than technological progress. “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,” Rajaram said.
While the policy changes address a key pain point for deep tech founders, access to capital remains a significant challenge, particularly beyond the early stages. Arun Kumar, managing partner at Celesta Capital, emphasized that the biggest gap has historically been funding depth at Series A and beyond, especially for capital-intensive firms. The RDI fund is intended to fill this void, routing public capital through venture funds to address chronic gaps in follow-on funding without interfering with private investment criteria.
The RDI fund is designed to operate similarly to private capital funds, providing financing with comparable tenors and commercial expectations. This approach aims to avoid distorting market dynamics while still providing crucial support for deep tech companies. Siddarth Pai, founding partner at 3one4 Capital and co-chair of regulatory affairs at the Indian Venture and Alternate Capital Association, noted that the new framework avoids a “graduation cliff” that historically cut companies off from support just as they began to scale.
The operational rollout of the RDI fund is underway, with the first batch of fund managers identified and the selection process for venture and private equity managers in progress. Pai explained that the fund is designed not only to invest through traditional fund-of-funds structures but also to take direct positions and provide credit and grants to deep tech startups.
In terms of scale, India’s deep tech market is still emerging compared to the United States, and China. Indian deep tech startups have raised a total of $8.54 billion to date. However, recent data indicates renewed momentum, with $1.65 billion raised in 2025 – a significant rebound from $1.1 billion in both 2023 and 2024, after peaking at $2 billion in 2022, according to Tracxn. This recovery suggests growing investor confidence, particularly in areas aligned with national priorities such as advanced manufacturing, defense, climate technologies, and semiconductors.
The disparity in funding between India and the US is substantial. In 2025, US deep tech startups raised approximately $147 billion, while China accounted for roughly $81 billion. This highlights the challenges India faces in building capital-intensive technologies, despite its strong engineering talent base.
For global investors, the Indian government’s policy changes are viewed as a signal of long-term commitment to the deep tech sector. Pratik Agarwal, a partner at Accel, explained that the extended regulatory recognition provides investors with greater confidence that the policy environment will remain stable over the long development cycles typical of deep tech companies. “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,” Agarwal said.
While the changes are unlikely to cause immediate shifts in investment allocation, they are expected to increase investor comfort with the Indian deep tech ecosystem. Agarwal added that the changes show India is learning from the US and Europe on how to create patient frameworks for frontier building.
Whether the new policies will reduce the tendency of Indian startups to incorporate overseas remains to be seen. The extended runway for benefits strengthens the case for building and staying in India, but access to capital and customers will continue to be key factors. India’s public markets have shown a growing appetite for venture-backed tech companies, making domestic listings a more viable option than in the past.
the success of India’s deep tech ecosystem will be measured by its ability to produce globally competitive companies. As Arun Kumar of Celesta Capital stated, the emergence of ten globally competitive deep tech companies from India achieving sustained success over the next decade would be a key benchmark for assessing the maturity of the ecosystem.
