India has changed its startup rules for deep tech

Deep tech startups in sectors such as space, semiconductors, and biotech take far longer to mature than conventional ventures. Because of that India is adjusting its startup rules, and mobilizing public capital, hoping to help more of them make it to commercial products.

This week, the Indian government updated its startup framework, doubling the period for which deep tech companies are treated as startups to 20 years and raising the revenue threshold for startup-specific tax, grant, and regulatory benefits to ₹3 billion (about $33.12 million), from ₹1 billion (around $11.04 million) previously. The change aims to align policy timelines with the long development cycles typical of science- and engineering-led businesses.

The change also forms part of New Delhi’s effort to build a long-horizon deep tech ecosystem by combining regulatory reform with public capital, including the ₹1 trillion (around $11 billion) Research, Development and Innovation Fund (RDI), announced last year. That fund is intended to expand patient financing for science-led and R&D-driven companies. Against that backdrop, U.S. and Indian venture firms later came together to launch the India Deep Tech Alliance, $1 billion-plus private investor coalition that includes Accel, Blume Ventures, Celesta Capital, Premji Invest, Ideaspring Capital, Qualcomm Ventures, and Kalaari Capital, with chipmaker Nvidia acting as an adviser.

For founders, these changes may fix what some see as an artificial pressure point. Under the previous framework, companies often risked losing startup status while still pre-commercial, creating a “false failure signal” that judged science-led 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, follow-on capital, and engagement with the state, which absolutely shows up in a founder’s operating reality over time,” Rajaram told TechCrunch.

Still, investors say access to capital remains a more binding constraint, particularly beyond the early stages. “The biggest gap has historically been funding depth at Series A and beyond, especially for capital-intensive deep tech companies,” Rajaram said. That is where the government’s earlier RDI fund is meant to play a complementary role.

“The real benefit of the RDI framework is to increase the funding available to deep tech companies at early and growth stages,” said Arun Kumar, managing partner at Celesta Capital. By routing public capital through venture funds with tenors similar to private capital, he said, the fund is designed to address chronic gaps in follow-on funding without altering the commercial criteria that govern private investment decisions.

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 framework avoids a “graduation cliff” that has historically cut companies off from support just as they scale.

These policy changes come as the RDI fund is beginning to take shape operationally, Pai said, with the first batch of fund managers identified and the process of selecting venture and private equity managers under way.

While private capital for deep tech already exists in India — particularly in areas such as biotech — Pai told TechCrunch the RDI Fund is intended to act as a nucleus around which greater capital formation can occur. 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 grows

In terms of scale, India remains an emerging rather than dominant deep tech market. Indian deep tech startups have raised $8.54 billion in total to date, but recent data point to 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, per Tracxn. The recovery suggests growing investor confidence, particularly in areas aligned with national priorities such as advanced manufacturing, defence, climate technologies, and semiconductors.

“Overall, the pickup in funding suggests a gradual move toward longer-horizon investing,” said Neha Singh, co-founder of Tracxn.

In comparison, U.S. deep tech startups raised about $147 billion in 2025, more than 80 times the amount deployed in India that year, while China accounted for roughly $81 billion, data from Tracxn shows.

The disparity highlights the challenge India faces in building capital-intensive technologies, even with its wealth of engineering talent. So the hope is that these moves by the Indian government will lead to more investor participation over the medium term.

A longer-term signal

For global investors, New Delhi’s framework change is being read as a signal of longer-term policy intent rather than a trigger for immediate shifts in allocation. “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,” said Pratik Agarwal, a partner at Accel. While he said the change would not alter allocation models overnight or eliminate policy risk entirely, it increased investor comfort that India is thinking about deep tech on longer time horizons.

“The change shows that India is learning from the U.S. and Europe on how to create patient frameworks for frontier building,” Agarwal told TechCrunch.

Whether the move will reduce the tendency of Indian startups to shift their headquarters overseas as they scale remains an open question.

The extended runway strengthens the case for building and staying in India, Agarwal said, though access to capital and customers still matters. Over the past five years, he added, India’s public markets have shown a growing appetite for venture-backed tech 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 procurement and late-stage capital will continue to shape where companies ultimately scale.

For investors backing long-horizon technologies, the ultimate test will be whether India can deliver globally competitive outcomes. The real signal, Kumar of Celesta Capital said, would be the emergence of a critical mass of Indian deep tech companies succeeding on the world stage.

“It would be great to see ten globally competitive deep tech companies from India achieve sustained success over the next decade,” he said, describing that as the benchmark he would look for in assessing whether India’s deep tech ecosystem is maturing.