India has changed its startup rules for deep tech

Deep tech startups in sectors resembling area, semiconductors, and biotech take far longer to mature than typical ventures. Due to that India is adjusting its startup guidelines, and mobilizing public capital, hoping to assist extra of them make it to business merchandise.

This week, the Indian authorities updated its startup framework, doubling the interval for which deep tech firms are handled as startups to twenty years and elevating the income threshold for startup-specific tax, grant, and regulatory advantages to ₹3 billion (about $33.12 million), from ₹1 billion (round $11.04 million) beforehand. The change goals to align coverage timelines with the lengthy growth cycles typical of science- and engineering-led companies.

The change additionally varieties a part of New Delhi’s effort to construct a long-horizon deep tech ecosystem by combining regulatory reform with public capital, together with the ₹1 trillion (round $11 billion) Analysis, Improvement and Innovation Fund (RDI), introduced final 12 months. That fund is meant to develop affected person financing for science-led and R&D-driven firms. Towards that backdrop, U.S. and Indian enterprise corporations later got here collectively to launch the India Deep Tech Alliance, $1 billion-plus non-public investor coalition that features Accel, Blume Ventures, Celesta Capital, Premji Make investments, Ideaspring Capital, Qualcomm Ventures, and Kalaari Capital, with chipmaker Nvidia acting as an adviser.

For founders, these adjustments might repair what some see as a synthetic strain level. Below the earlier framework, firms typically risked shedding startup standing whereas nonetheless pre-commercial, making a “false failure sign” that judged science-led ventures on coverage timelines fairly than technological progress, mentioned Vishesh Rajaram, founding companion at Speciale Make investments, an Indian deep tech enterprise capital agency.

“By formally recognizing deep tech as totally different, the coverage reduces friction in fundraising, follow-on capital, and engagement with the state, which completely reveals up in a founder’s working actuality over time,” Rajaram informed TechCrunch.

Nonetheless, buyers say entry to capital stays a extra binding constraint, significantly past the early levels. “The most important hole has traditionally been funding depth at Collection A and past, particularly for capital-intensive deep tech firms,” Rajaram mentioned. That’s the place the federal government’s earlier RDI fund is supposed to play a complementary position.

“The true good thing about the RDI framework is to extend the funding out there to deep tech firms at early and development levels,” mentioned Arun Kumar, managing companion at Celesta Capital. By routing public capital by way of enterprise funds with tenors just like non-public capital, he mentioned, the fund is designed to handle persistent gaps in follow-on funding with out altering the business standards that govern non-public funding selections.

Siddarth Pai, founding companion at 3one4 Capital and co-chair of regulatory affairs on the Indian Enterprise and Alternate Capital Affiliation, mentioned India’s deep tech framework avoids a “commencement cliff” that has traditionally lower firms off from help simply as they scale.

These coverage adjustments come because the RDI fund is starting to take form operationally, Pai mentioned, with the primary batch of fund managers recognized and the method of choosing enterprise and personal fairness managers underneath means.

Whereas non-public capital for deep tech already exists in India — significantly in areas resembling biotech — Pai informed TechCrunch the RDI Fund is meant to behave as a nucleus round which higher capital formation can happen. In contrast to a conventional fund-of-funds, he famous, the car can also be designed to take direct positions and supply credit score and grants to deep tech startups.

India’s deep tech funding grows

When it comes to scale, India stays an rising fairly than dominant deep tech market. Indian deep tech startups have raised $8.54 billion in complete to this point, however current knowledge level to renewed momentum. Indian deep tech startups raised $1.65 billion in 2025, a pointy rebound from $1.1 billion in every of the earlier two years after funding peaked at $2 billion in 2022, per Tracxn. The restoration suggests rising investor confidence, significantly in areas aligned with nationwide priorities resembling superior manufacturing, defence, local weather applied sciences, and semiconductors.

“Total, the pickup in funding suggests a gradual transfer towards longer-horizon investing,” mentioned Neha Singh, co-founder of Tracxn.

Compared, U.S. deep tech startups raised about $147 billion in 2025, greater than 80 instances the quantity deployed in India that 12 months, whereas China accounted for roughly $81 billion, knowledge from Tracxn reveals.

The disparity highlights the problem India faces in constructing capital-intensive applied sciences, even with its wealth of engineering expertise. So the hope is that these strikes by the Indian authorities will result in extra investor participation over the medium time period.

An extended-term sign

For international buyers, New Delhi’s framework change is being learn as a sign of longer-term coverage intent fairly than a set off for fast shifts in allocation. “Deep tech firms function on seven- to twelve-year horizons, so regulatory recognition that stretches the lifecycle offers buyers higher confidence that the coverage setting is not going to change mid-journey,” mentioned Pratik Agarwal, a companion at Accel. Whereas he mentioned the change wouldn’t alter allocation fashions in a single day or eradicate coverage danger fully, it elevated investor consolation that India is considering deep tech on longer time horizons.

“The change reveals that India is studying from the U.S. and Europe on the right way to create affected person frameworks for frontier constructing,” Agarwal informed TechCrunch.

Whether or not the transfer will scale back the tendency of Indian startups to shift their headquarters abroad as they scale stays an open query.

The prolonged runway strengthens the case for constructing and staying in India, Agarwal mentioned, although entry to capital and prospects nonetheless issues. Over the previous 5 years, he added, India’s public markets have proven a growing appetite for venture-backed tech companies, making home listings a extra credible choice than up to now. That, in flip, may ease a number of the strain on deep tech founders to include abroad, even when entry to procurement and late-stage capital will proceed to form the place firms in the end scale.

For buyers backing long-horizon applied sciences, the final word check can be whether or not India can ship globally aggressive outcomes. The true sign, Kumar of Celesta Capital mentioned, can be the emergence of a vital mass of Indian deep tech firms succeeding on the world stage.

“It could be nice to see ten globally aggressive deep tech firms from India obtain sustained success over the following decade,” he mentioned, describing that because the benchmark he would search for in assessing whether or not India’s deep tech ecosystem is maturing.