India’s deep-tech funding shift: Patience, patents, and big bets

Undeterred, Vempati, founder of the Hyderabad-based deep-tech startup Makers Hive, turned to strategic angel investors, doctors, hospital heads and industry insiders, who understood the problem and the patience it would take to solve it.

It took years for venture capital to come calling. A few months ago, Makers Hive finally raised its first VC-backed bridge round of ₹10 crore from Silverneedle Ventures and is in talks to raise a Series A between March and May. The shift in mindset is evident. “Now, nobody is talking about timelines. The questions are about patents, IP and what technology you are building. Earlier, it was about how fast you could scale," Vempati told Mint.

For Bengaluru-based Tsalla Aerospace, a seven-year-old startup developing sustainable military and industrial-grade products, most early conversations ended with “great tech but too early or too slow or too complex."

According to founder and chief executive officer (CEO) Vinayak Tsalla, over the last year, the conversations have changed. “With validated technology, government contracts, real deployments and revenue visibility, VCs now engage more seriously. The tone has shifted from ‘prove this can work’ to ‘how big can this get,’" he said.

While Makers Hive and Tsalla Aerospace survived to see this change, many deep-tech startups could not. Subtl.ai and Log9 Materials, founded around the same period, shut shop after struggling with long product cycles and a paucity of capital.

India has long been able to churn out consumer internet and software-as-a-service (SaaS) companies, but building deep-tech firms—those rooted in advanced engineering, materials science or hardware—has been a challenge. Venture capital, with its preference for quick growth and predictable exits, was often blamed for the gap. Now that same capital is attempting to rewrite the story.

According to Tracxn, funding into Indian deep-tech startups rose to about $1.15 billion in 2025, up from $843 million in 2024. In recent months, investors have launched dedicated deep-tech initiatives: Lightspeed has sharpened its focus on India-built deep-tech companies; Speciale Invest has announced plans for a ₹1,400-crore fund; Shastra VC has rolled out a deep-tech fellowship; the Indian Institute of Technology (IIT) Bombay’s Society for Innovation and Entrepreneurship (SINE) has launched India’s first incubator-linked deep-tech VC fund; and BYT Capital has debuted its ₹180-crore maiden fund.

The state is stepping in, too. In April, commerce minister Piyush Goyal announced a ₹10,000-crore ‘fund of funds’ for deep-tech, with ₹2,000 crore earmarked for lab-to-market transitions.

The question is whether this convergence of venture capital and government support can overcome deep-tech’s structural hurdles, such as long gestation periods, high capital requirements and uncertain exits. Mint spoke with investors, founders and industry experts to get some answers.

The context

India’s VC ecosystem has been shaped for the better part of the last decade by bets that deliver quick scale and clear monetization paths, with consumer internet, marketplaces, fintech and SaaS absorbing the lion’s share of funding.

According to Bain and Co.’s venture capital report 2025, these sectors together accounted for more than 60-70% of VC investment value in 2024. Consumer tech alone drew $5.4 billion and SaaS/enterprise software and generative artificial intelligence (AI) secured around $1.7 billion, as investors chased recurring revenue and global markets. Total funding stood at about $14 billion during the year, according to the report.

More recently, in 2025, of the $9 billion total VC investment, consumer and SaaS accounted for about 50% or $4.3 billion funding whereas deep-tech made up for $1.15 billion, according to data sourced from Tracxn. This dominance reflects the classic VC playbook of investing in businesses with rapid adoption curves, predictable unit economics and clear exit opportunities within a typical three- to five-year horizon.

In contrast, deep-tech has historically received only a small fraction of total VC dollars, often under 5-10% of funding, despite its strategic importance and higher long-term value potential. According to Tracxn, only 24 VC firms in India have invested in 10 or more deep-tech startups in the last five years.

Why the sudden shift?

So, what’s behind the new funds and programmes focused on deep tech that have sprung up in recent months?

Venture capital’s renewed interest in deep tech is being shaped as much by policy as by markets. Over the past few years, the Indian government has taken a more active role in derisking early innovation, especially in sectors with strategic importance such as defence, space, semiconductors, climate and advanced manufacturing.

Public capital has stepped in where private investors have historically hesitated, at the research and prototyping stage, where technical risk is highest and timelines are longest. Initiatives such as Startup India, Innovations for Defence Excellence (iDEX), the Indian National Space Promotion and Authorization Centre (IN-SPACe) and the Research, Development and Innovation (RDI) Scheme announced in Union Budget 2024 are designed to accelerate lab-to-market transitions.

“Deep tech by nature requires blended capital, patient venture funding alongside catalytic public support," said Sadhika Agarwal, who leads investments at Equirus InnovateX Fund.

The situation mirrors earlier policy-led playbooks. “We’ve seen similar cycles before in renewables and solar. Government procurement and subsidies created predictable demand, which eventually pulled in private capital and built global champions," said Avijeet Alagathi, managing partner at Shastra VC. More recently, production-linked incentive (PLI) schemes have done something similar in electronics manufacturing.

“It’s easier for deep-tech-focused funds to find LPs (limited partners) who understand patience," said Alagathi.

Indeed, deep tech’s long gestation periods and uneven risk-reward profile have led to the rise of specialized deep-tech vehicles with aligned LPs. Examples include Speciale Invest’s new growth-stage investment fund; Shastra’s recently launched SDEX programme; Chiratae Ventures’ sonic deep-tech programme for faster investments; and Lightspeed’s deep-tech accelerator programme, India Ascends.

Geopolitical uncertainty and supply-chain disruptions have sharpened this focus, pushing capital towards areas aligned with national priorities such as quantum security and drones, according to Vishesh Rajaram, co-founder and managing partner at Speciale Invest. “It has made us look inward," he said.

Talent dynamics are reinforcing this shift. According to investors, more founders are now emerging from Indian research institutions, while Indian-origin scientists and engineers with global experience are returning to build companies at home. “The idea that serious technology can come out of Indian academia has been well established in the last five to seven years," Rajaram said, pointing to faculty-led successes from IITs, where deep research has translated into commercial outcomes.

For example, last year, Mint wrote about Satyanarayanan Chakravarthy, a professor at IIT Madras who has crossed over to become an entrepreneur.

Supply-chain constraints have also eased over the past four years, according to industry experts. Disruptions during the covid-19 pandemic and geopolitical shifts have accelerated the build-out of India’s manufacturing ecosystem. Component costs have fallen closer to global benchmarks, while quality control and process reliability have improved. “Across batteries, tooling, machining and 3D printing, ecosystem support has grown significantly," Vempati said.

For Amit Chand, founder of BYT Capital, this convergence is decisive. “Policy support, market demand, maturing research institutions and returning talent are aligning for the first time," he said. This has shifted how investors view risk.

The new playbook

Venture capitalists backing deep tech increasingly agree on one thing: the new playbook is that there is no playbook. For Speciale Invest’s Rajaram, the biggest mental shift is abandoning the idea that deep tech can be templatized at all. “Each sector operates very differently and each has distinct go-to-market paths, regulatory timelines and capital needs," he said.

Five years ago, most investors would not even consider government-linked, defence or hardware-heavy businesses. “Everyone wanted scalable SaaS models," said Sunil Gupta, co-founder and CEO of QNu Labs, one of India’s larger deep-tech startups. “But that has changed significantly in the last few years."

Investors are accepting exit timelines, structuring milestones around technical validation and real-world deployments rather than near-term revenue, and working more closely with governments, strategic customers and large corporates to help startups reach the market.

This shift has forced VCs themselves to rethink how their funds are designed. According to Equirus’s Agarwal, deep-tech-focused investors are restructuring fund tenures, deployment schedules and follow-on strategies. “Longer tenures and extended harvesting periods are becoming the norm," she said, aided in part by a rise in tech initial public offerings (IPOs), which have made LPs more comfortable with patient capital.

“For example, a VC firm backing founders in deep-tech in its third fund has allocated 50% of its total corpus for follow-on investments," said Agarwal.

Another VC firm, Jamwant Ventures, which focuses on defence and strategic technologies, allocates large follow-on reserves (capital set aside to invest further in successful portfolio companies) to support capital-intensive growth phases, and accelerates writeoffs to free capital quickly for winners.

“Deep tech needs faster iteration and longer conviction," said Jamwant Ventures founder and managing partner Cdr Navneet Kaushik, who has invested in companies such as Green Aero Propulsion, SpaceFields and Thrustworks Dynetics.

Liquidity, long seen as deep tech’s weakest link, is also being addressed more creatively. Strategic corporate investors and mission-aligned LPs are increasingly co-investing, helping derisk long product cycles and accelerate market entry, Agarwal added. Last year, for instance, Yali Capital closed its maiden deep-tech focused fund with a mix of corporate and institutional LPs such as Infosys, Tata AIG General Insurance, Qualcomm Ventures and the Self-Reliant India (SRI) Fund.

“Public markets have become a more meaningful channel," said Agarwal, pointing to Indian tech companies that have successfully listed, reinforcing that capital market exits are possible for technology businesses built in India.

Globally, deep-tech outcomes have also helped reset expectations. Padmaja Ruparel, co-founder of IAN Group, said sectors such as semiconductors, space and life sciences have shown that meaningful results often take a decade or more, but once they mature, they deliver disproportionate value. There has been a nearly 6x increase in global deep-tech unicorn exits between 2018 and 2022, according to an AI and deep-tech transformation report by Praxis Global Alliance.

Just last year, Google acquired cloud security leader Wiz for $32 billion and California-based Marvell Technology acquired Celestial AI for about $3 billion. As for IPOs, New Jersey-based CoreWeave completed a public listing in 2025 at a valuation of $23 billion.

The road ahead

On paper, India’s deep-tech funding story looks encouraging. Of the $1.15 billion raised by startups in the sector in 2025, early-stage rounds alone accounted for more than $850 million.

That concentration reveals the real gap—availability of capital has improved at the start, but is scarce where it matters most.

Pre-seed funding has improved significantly, but capital thins out sharply at Seed and Series A/B, especially for companies building original technology rather than services, said Vinayak of Tsalla Aerospace. This gap becomes most visible as startups move from promising prototypes to commercially viable products.

Venture investors describe this phase using a familiar term: the valley of death. It typically sits between technology readiness levels (TRL) 4 and 7, when a startup has proven its technology in the lab but still needs large amounts of capital to turn it into an industrial-scale product.

“Early-stage money exists, and growth-stage capital comes once the technology is proven. The problem is the middle. That’s where startups need the most money, and where fundraising starts to drag," said Chand.

In this valley, costs spike just as revenue remains uncertain. Hardware must be tested, certified, manufactured and deployed in the real world. Timelines stretch and failure is common.

Some investors believe the gap is already beginning to narrow. According to Equirus’s Agarwal, the next 12-18 months could see more stage-agnostic and growth-focused deep-tech funds targeting Series A and B rounds. Larger cheques and closer-to-market investing would signal deeper conviction in the sector.

“Businesses are growing and many will get to the growth stage. Some green shoots have started to emerge already, but it will take around 18 months before the growth stage flow picks up credibly in deep tech," said Madhur Singhal, managing partner, private capital, Praxis Global Alliance.

Even then, acceptance will take time. Compared to the US and China, India’s share of global deep-tech investment remains small. Convincing the first customer to pay for a homegrown deep-tech solution is hard. Market adoption and credibility will remain tough for a few years, according to investors.

As Rajaram of Speciale Invest put it, “Deep-tech doesn’t change to fit venture capital. Venture capital has to adapt and learn."

The question now is whether this new wave of capital will be patient enough to help startups cross the Valley of Death. Deep-tech doesn’t fail fast—it fails expensively and slowly, said Tsalla. But, he added, when it works, the payoff is massive.