BENGALURU: At Startup Mahakumbh this month, commerce and industry minister Piyush Goyal urged Indian entrepreneurs to pivot from “being the back office of the world to becoming a global technology and innovation powerhouse.” He added that India would make a “substantial allocation” towards deeptech through the govt’s Rs 10,000 crore fund of funds.
It’s a timely boost. India’s deeptech ecosystem — comprising startups in artificial intelligence, spacetech, advanced manufacturing, and semiconductor design — added over 480 new ventures in 2023, up two times the previous year. The cumulative base now stands close to 4,000.
In 2024, the sector experienced a remarkable surge in funding, with investments rising by 78% compared to the previous year. The sector’s expansion was fueled by supportive govt policies, rapid advancements in generative AI and breakthrough innovations from emerging companies, as per a report just released by Nasscom and Zinnov .
The report says the top 10 deeptech startup funding rounds in 2024 accounted for about $600 million of the total deeptech funding, which stood at $1.6 billion. Of these top 10, all but one were AI-powered software platforms solving for different use cases.
These deeptech startups not only attracted more funding but also commanded higher investor confidence, with median ticket sizes matching or surpassing those of traditional tech startups.
Yet, founders and investors warn that India risks squandering this momentum unless the ecosystem matures beyond early-stage support and builds robust demand, capital continuity, and meaningful exit pathways.
“The best way to ensure Rs 10,000 crore reaches the right builders is to ally with the right venture capital funds who have a good track record,” said Kaushik Mudda, cofounder of Ethereal Machines, a Bengaluru-based startup that builds CNC machines critical to precision manufacturing. “Most funds or venture capitalists either try to rely on market reports and studies or western models that have worked to make investment decisions instead of spending time understanding underlying technologies.”
Mudda sees the govt’s current push as a “real policy pivot,” one that signals long-term national ambition. But deeptech startups face a fundamental challenge — revenue often comes after years of R&D, and capital needs are front-loaded. “We’ve managed by being extremely frugal,” Mudda said. “Now I see a lot more startups having the benefit of raising larger rounds in deeptech, I hope that the funds are then used wisely before revenue kicks in.”
Some founders argue that the bigger bottleneck lies in the lack of domestic market depth. Saurabh Chandra , founder of Ati Motors, a startup building autonomous industrial vehicles, said the lack of a domestic market also increases the capital requirements for a startup since global markets are the only viable option. “This is the route we have also taken,” he said.
India’s market reality forces deeptech startups to behave like Israeli ventures — building for the world from Day One — rather than following the domestic scale-first playbook common in China or the US. “The only way the domestic market for deeptech will open up is by increasing competition at the top,” Chandra said. “Few large companies dominate, and technology is not an edge that is required for them to win.”
That structural imbalance also explains the tepid M&A environment. Chandra said if the domestic deeptech acquisition engine opened up, it would lead to capital chasing this space. “We have it backwards today by blaming lack of capital,” he said.
Arpit Agarwal, partner in early-stage backer Blume Ventures, also noted that larger public companies in India have rarely acquired Indian companies for IP or product. “Much of the scaling up of Indian enterprises has happened through the reinvention of business models or putting a lot of capital to task,” he said, and expressed optimism that over time, management and shareholders will be able to see more value in deeptech.
Vinod Shankar , founding partner at Java Capital, also sees potential for India Inc to plug the gap — if nudged. “Top 100 listed companies in India have a large amount of free cash flows,” he said. “Legislation to divert a portion of profits for deeptech investments or acquisitions will catalyse the ecosystem.”
He also pointed out that while India has a robust research pipeline, it lacks scale-stage funding. “India lacks capital at Series B and above in deeptech startups,” Shankar noted. “The capital needs to spread across incubators, early stage and potentially secondary funds, which can create liquidity for early investors to continue the virtuous cycle in deeptech.”