India has moved to fundamentally reshape how it supports deep tech startups, acknowledging that companies building frontier technologies take far longer to mature than conventional ventures. In a significant policy shift, the government this week updated its startup framework to better align with the realities of sectors such as space, semiconductors, and biotechnology, signaling a long-term bet on science-led innovation.
Under the revised rules, deep tech companies will now retain startup status for up to 20 years, double the previous limit. The revenue ceiling for accessing startup-specific tax incentives, grants, and regulatory benefits has also been raised to ₹3 billion, or about $33.12 million, from ₹1 billion earlier. The move is designed to reflect the extended research, development, and commercialization cycles typical of engineering- and science-heavy businesses.
The regulatory overhaul is part of a broader effort by New Delhi to build a durable deep tech ecosystem by pairing policy reform with patient public capital. Central to this strategy is the ₹1 trillion, or roughly $11 billion, Research, Development and Innovation Fund announced last year, aimed at expanding long-horizon financing for R&D-driven companies. Alongside this, U.S. and Indian venture firms have come together to form the India Deep Tech Alliance, a private investor coalition of more than $1 billion that includes Accel, Blume Ventures, Celesta Capital, Premji Invest, Ideaspring Capital, Qualcomm Ventures, and Kalaari Capital, with Nvidia acting as an adviser.
For founders, the updated framework addresses what many viewed as an artificial and damaging pressure point. Under the earlier rules, deep tech companies often lost their startup status while still years away from commercial products, creating what investors called a false signal of failure. Vishesh Rajaram, founding partner at Speciale Invest, said this misalignment judged science-led ventures by policy timelines rather than technological progress. By formally recognizing deep tech as a distinct category, he said, the government has reduced friction in fundraising, follow-on capital, and engagement with the state, a shift that directly affects how founders operate over time. Rajaram made those remarks to TechCrunch.
Despite the policy gains, investors caution that access to capital remains the most binding constraint, especially beyond the seed stage. Rajaram noted that funding depth at Series A and later rounds has historically been thin, particularly for capital-intensive ventures. The government’s RDI fund is intended to complement private capital by filling these gaps. Arun Kumar, managing partner at Celesta Capital, said the fund’s real value lies in increasing the pool of capital available to deep tech companies at both early and growth stages, while still routing money through venture funds operating on commercial principles. Kumar shared his views with TechCrunch.
Industry representatives say the revised framework also avoids a so-called graduation cliff, where companies were previously cut off from support just as they began to scale. Siddarth Pai, founding partner at 3one4 Capital and co-chair of regulatory affairs at the Indian Venture and Alternate Capital Association, said the RDI fund is now beginning to take shape operationally, with the first batch of fund managers identified and the selection of venture and private equity partners under way. Pai told TechCrunch that while private capital for deep tech already exists in India, particularly in biotech, the RDI fund is meant to act as a nucleus for broader capital formation. Unlike a traditional fund-of-funds, the vehicle can also take direct stakes and provide credit and grants.
India’s deep tech sector remains small by global standards, but recent funding data suggest renewed momentum. Indian deep tech startups have raised $8.54 billion in total to date. In 2025, they raised $1.65 billion, rebounding from $1.1 billion in each of the previous two years after peaking at $2 billion in 2022, according to Tracxn. Neha Singh, co-founder of Tracxn, said the recovery points to growing investor confidence and a gradual shift toward longer-horizon investing, especially in areas aligned with national priorities such as advanced manufacturing, defence, climate technologies, and semiconductors.
The contrast with global leaders remains stark. U.S. deep tech startups raised about $147 billion in 2025, while China accounted for roughly $81 billion, far outpacing India’s totals. The gap underscores the scale of the challenge India faces in building capital-intensive technologies, even as it boasts deep engineering talent. Policymakers and investors hope the latest reforms will draw more participation over the medium term.
For global investors, the framework change is being interpreted less as an immediate catalyst and more as a signal of long-term policy intent. Pratik Agarwal, a partner at Accel, said deep tech companies operate on seven- to twelve-year horizons, and regulatory recognition that spans decades gives investors greater confidence that the rules will not shift mid-journey. While the change may not alter allocation models overnight, Agarwal told TechCrunch it improves comfort that India is thinking about frontier technologies with patience similar to the U.S. and Europe.
Whether the reforms will reduce the tendency of Indian startups to move their headquarters overseas as they scale remains uncertain. Agarwal said the extended runway strengthens the case for building in India, though access to capital and customers will continue to influence decisions. He added that India’s public markets have shown a growing appetite for venture-backed tech companies in recent years, making domestic listings more credible and easing some pressure on founders to incorporate abroad.
