In what ways are policy, capital, and infrastructure beginning to align for India’s deep-tech future?

India’s deep-tech sector is moving faster than before, though not evenly. By July 2025, deep-tech startups had raised USD 1.06 billion across 137 rounds, almost twice what they raised in the same period a year earlier (Entrepreneur, 2025). For 2024, total funding reached USD 1.6 billion, up 78 percent from 2023 (The Economic Times, 2025). The growth is clear, but so are the gaps.

One big issue is how we define “deep-tech.” Depending on who you ask, it could mean anything from advanced AI to quantum hardware. In practice, about 80 percent of India’s deep-tech funding still goes to AI-centric startups, showing that the ecosystem leans more toward software than science-driven engineering (The Economic Times, 2025).

Of India’s 31,000 plus tech startups, only about 3,600 (roughly 12 percent) qualify as deep-tech, and just about 500 of those are truly “hard-science” ventures (Swarajya, 2025). Even though deep-tech firms make up around 4 percent of all recognized startups (around 4,300 of 100,000), they attract most of the capital into AI, not into hardware or materials (Startup Wired, 2025). This is not a question of ambition but of arithmetic. India’s venture system still rewards software’s quick returns more than hardware’s long haul.

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Why AI Dominates: The Venture Logic

In 2025, India’s largest deep-tech rounds such as Netradyne ($90M), SpotDraft ($54M), and Infinite Uptime ($35M) were all AI or analytics companies. They grew fast and generated revenue early. That speed matters. Globally, deep-tech startups take 35 percent longer and need 48 percent more capital to reach $5 million in revenue (Dealroom, 2023). Top AI startups, by comparison, can hit $3–$40 million ARR in their first year and reach $100 million within four (Bessemer, 2025).

Most Indian VC funds are 10–12-year vehicles regulated under SEBI’s AIF regime, which limits flexibility for long R&D bets (IIMB ScienceDirect, 2024). As Speciale Invest puts it, deep-tech needs “less-impatient capital,” because multi-year R&D cycles stretch typical fund horizons (Economic Times B2B, 2025). The issue, therefore, is not a lack of imagination but one of financial structure.

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The Missing Middle: Capital for Real Science

Hard-science ventures working in semiconductors, advanced materials, clean energy, or space technology still face a funding drought. Examples such as Wankel Energy Systems (IIT Madras; $1 million pre-seed) and Plenome Technologies (₹6.5 crore seed) may seem sizable at first glance, but in deep-tech terms they are modest. Building hardware, testing materials, or running long R&D cycles can easily consume several million dollars before reaching a working prototype, so these amounts often cover only the first leg of technical validation rather than true product development. In the DeepTech India 2025 Report, 53 percent of founders cited capital inaccessibility as their biggest challenge (Times of India, 2025).

Even after the global downturn of 2023, when deep-tech funding dropped 77 percent to $850 million, India’s main hurdle remains the same: moving from prototype to production. Among roughly 6,300 deep-tech firms, only 357 reached Series A and just 198 made it to Series B or beyond. That means fewer than 6 percent have reached the mid-stage funding required for production-scale growth (Tracxn, 2025).

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Why the Overfunded and Underfunded Coexist

AI startups fit the traditional VC playbook: quick pilots, early revenue, and clear user growth (Bain India VC Report, 2024). Hardware founders, by contrast, may spend 12–24 months just to build a working prototype (Bolt Blog, 2023). That delay increases the perceived risk for investors.

Even AI startups face cost barriers such as compute infrastructure. When Sarvam AI raised $41 million in 2023, it coincided with the IndiaAI Mission, which provided 10,000 plus GPUs and subsidized compute to improve startup economics (TechCrunch, 2023). This is a good example of how state-backed infrastructure can reduce private risk. Hard-tech startups still lack that kind of support.

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State Capacity Steps In

The Union Budget 2025 announced a ₹10,000 crore Deep-Tech Fund of Funds to co-invest with private VCs. Alongside it, the US–India Deep Tech Investment Alliance (IDTA) brought together Celesta, Accel, Blume, Premji Invest, and Gaja Capital under the ₹1 trillion RDI scheme (PIB, 2025).

The IDTA is designed to back Indian-domiciled ventures in semiconductors, robotics, energy, space, and climate tech, offering long-term capital and mentorship (PR Newswire, 2025). A second ₹10,000 crore tranche aims to promote “innovation and absorption of new technologies” in machine-building and advanced manufacturing (Business Standard, 2025).

Domestic funds such as #100DesiDeepTechs, Yali Capital (₹893 crore), and Speciale Invest (₹600 crore) are adding to this pipeline (Mint, 2025). Still, with total deep-tech funding around $1.5 billion, India remains far below global infrastructure-scale investment levels (ET, 2025).

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Early Signs of Change

Execution is slow but visible. Yali Capital, for instance, closed five deep-tech deals within months using a domestic fund linked to a GIFT City feeder, which allowed smoother access to global capital (Mint, 2025). Wankel Energy’s IIT-Madras incubation and private VC support show that “blended finance” models can work (Entrepreneur, 2025).

EON Space Labs raised $1.2 million for ultra-light telescopes. Pixxel, backed by Google, launched India’s first private hyperspectral satellite network (Analytics India Magazine; Reuters, 2025). Agnikul, another IIT-Madras startup, completed the world’s first single-piece 3D-printed engine launch, and ideaForge secured a ₹137 crore Army order (PIB, 2024). Together, these examples show how policy, capital, and infrastructure are beginning to align.

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The Real Bottleneck: Infrastructure

For now, founders still have to build their own cleanrooms and pilot plants, which raises costs by 40 to 60 percent. Many remain dependent on foreign foundries such as TSMC, UMC, and DB Hi-Tek (The Economic Times, 2025). India’s semiconductor effort is progressing but will take years to mature.

A new policy idea is gaining ground: creating “deep-tech commons,” meaning shared facilities for fabrication and testing that are publicly funded but commercially operated. This model mirrors the IndiaAI Mission’s compute pool (PIB, 2024). In the U.S., the National Nanotechnology Coordinated Infrastructure (NSF, 2025) provides startups access to 16 nanofab sites, drastically reducing capital cost and investor risk. Similarly, Germany’s Fraunhofer IZM Start-A-Factory offers subsidized prototype production lines to accelerate commercialization. If implemented well in India, such commons could cut early-stage costs in half and make hard-tech investment viable within three to five years.

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The Bottom Line

India’s deep-tech journey is no longer about intent but about execution. Startups need patience, and the state needs disciplined capital deployment. With new funds, alliances, and compute subsidies, India is assembling its innovation stack, unevenly but steadily.

If this momentum continues, India will not only adopt frontier technologies but also start inventing them.