India changed its startup rules for deep tech | TechCrunch

Deep tech startups in sectors such as space, semiconductor and biotechnology take much longer to mature than conventional companies. For this reason, India is adjusting its startup rules and mobilizing public capital, hoping to help more of them access commercial products.

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

The move is also part of New Delhi’s efforts to build a deep, long-term technology ecosystem by combining regulatory reform with public capital, including the ₹1 trillion (about $11 billion) Research, Development and Innovation (RDI) Fund, announced last year. This fund is intended to increase patient funding for science and R&D-focused companies. In this context, American and Indian venture capital companies then came together to launch the India Deep Tech Alliancea billion-dollar-plus coalition of private investors including Accel, Blume Ventures, Celesta Capital, Premji Invest, Ideaspring Capital, Qualcomm Ventures and Kalaari Capital, along with a chipmaker Nvidia acting as advisor.

For founders, these changes could address what some see as an artificial pressure point. Under the previous framework, companies often risked losing their startup status while they were still pre-commercial, creating a “false signal of failure” that judged science-based companies on political deadlines rather than technological progress, said Vishesh Rajaram, founding partner of 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 operational reality over time,” Rajaram told TechCrunch.

Investors nevertheless say that access to capital remains a more restrictive constraint, particularly beyond the initial stages. “The biggest gap has always been the depth of Series A funding and beyond, especially for capital-intensive deep tech companies,” Rajaram said. This is where the government decided earlier RDI Fund is supposed to play a complementary role.

“The real benefit of the RDI framework is to increase the funding available to deep tech companies at the seed and growth stages,” said Arun Kumar, managing partner at Celesta Capital. By channeling public capital into venture funds with similar durations to private capital, he explained, the fund is designed to fill chronic gaps in follow-on financing without changing the commercial criteria that govern private investment decisions.

Siddharth Pai, founding partner of 3one4 Capital and co-chairman of regulatory affairs at the Indian Venture and Alternate Capital Association, said India’s deep technology framework avoids a “graduation cliff” that has historically cut off companies from support as they scale.

These policy changes come as the RDI fund begins to take shape operationally, Pai said, with the identification of the first group of fund managers and the selection process for venture capital and private equity managers underway.

While private capital for deep technology already exists in India – particularly in areas such as biotechnology – Pai told TechCrunch that the RDI Fund is intended to act as a core around which greater capital formation can take place. 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.

Funding for deep tech in India increases

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

“Overall, the resumption of funding suggests a gradual shift towards longer-term investments,” said Neha Singh, co-founder of Tracxn.

In comparison, US deep tech startups raised around $147 billion in 2025, more than 80 times the amount deployed in India that year, while China accounted for around $81 billion, according to Tracxn data.

This disparity highlights the challenge India faces in developing capital-intensive technologies, even with its wealth of talented engineers. It is therefore hoped that these measures taken by the Indian government will lead to increased investor participation in the medium term.

A longer-term signal

For global investors, the change in framework in New Delhi is being interpreted as a signal of long-term policy intent rather than a trigger for immediate changes in allocation. “Deep tech companies operate on horizons of seven to 12 years, so regulatory recognition that lengthens the life cycle gives investors greater confidence that the policy environment will not change mid-term,” said Pratik Agarwal, partner at Accel. While he said the change would not change allocation models overnight or completely eliminate political risk, it would reassure investors that India is thinking about deep tech for the longer term.

“The shift shows that India is learning from the US and Europe on how to create patient frameworks for border construction,” Agarwal told TechCrunch.

It remains an open question whether the move will reduce the tendency of Indian startups to move their headquarters abroad as they grow.

The runway expansion strengthens the case for building and staying in India, Agarwal said, although access to capital and customers remains important. Over the past five years, he added, Indian public procurement has shown a growing appetite for venture-backed tech companieswhich makes national listings a more credible option than in the past. This, in turn, could alleviate some of the pressure on deep tech founders to expand overseas, although access to late-stage purchasing and capital will continue to determine the companies’ ultimate evolution.

For investors who support technologies for the long term, the ultimate test will be whether India can produce globally competitive results. The real signal, according to Celesta Capital’s Kumar, would be the emergence of a critical mass of Indian deep tech companies that succeed on the global stage.

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