India needs a deeptech fund and not just a startup fund

With the rise of India Stack, UPI and consumer apps, India has rapidly evolved into a digital economy. This has enabled Indians to go online to ease payments, logistics, e-health, etc. While digital-first startups have reshaped the consumer economy and enabled incredible convenience, they depend on existing infrastructure, global tech stacks, and incremental innovation.

By contrast, deeptech startups seek to build new knowledge, new capabilities, and new industries by leveraging core science, engineering, and research. These startups operate in the real economy, building physical products, core technologies, and complex systems.

Indian tech talent has been innovating and building next-gen technology for global companies for many years. But today, what has changed is that best-in-class Indian talent is building in India for India. They are building to solve real problems and aligning with national strategic imperatives, which include semiconductor and quantum, space to biotechnology, electronics to materials, etc.

These deeptech startup founders are driven by an ambitious vision and innovation based on fundamental science. It’s incredible what is bubbling on the ground: UAVs that can operate underwater, or those that can reach Siachen, leveraging space to connect the unconnected, and using plant-based proteins to heal burns, fractures.

Globally, sovereign investments in deeptech have driven revolutions in clean energy, healthcare, aerospace, and cybersecurity. These technologies are not merely market opportunities; they are tools of strategic leverage and self-reliance.

Such startups need deep pockets of patient money and an environment that allows them to develop, evolve, and then commercialise. Hence, there is a need for both public and private capital: equity, debt, and grants. It is significant to note that the government has already unlocked funding through grant schemes, whether through SISFS (Startup India Seed Fund Scheme), the first and second Fund of Funds (under the SIDBI umbrella), the space-tech fund, BIRAC’s grant ecosystem and ACE Fund, and, most recently, the RDI Fund.

Over Rs 1.2 lakh crore in early-stage funding has been unlocked by the central government. Apart from this, state governments also have their startup funds. All these funds are catalytic in unlocking private investment. Domestic private funding has also opened up, but very, very warily.

Despite capital unlocking, the gap remains

One of the largest challenges technology-intensive firms in India face is the mismatch between their development cycles and the preferences of conventional capital. Venture funds are mostly structured for returns in the short to medium term, which do not match the 7-10 year product maturity cycles prevalent in deep science or hardware-driven innovation.

The gap is now at the next level: when such startups seek to scale to, say, establish a fabrication unit, conduct clinical trials, or target international approvals, access to funding becomes scarce. Banks remain risk-averse, and, to be honest, private investors tend to avoid anything that appears “too early,” “too difficult,” or requires a long holding period. Banks are not ready to take early bets, and debt funding is still focused on cash flows to ensure regular paybacks.

Given the nature of deeptech, the timelines from inception to commercially meaningful outcomes are long. Progress varies with sector dynamics, regulatory changes, technology maturity, and market readiness. For example, Lamark Biotech took 18 months to record its first revenue and more than four and a half years for its ProteoStrong-based products to reach scale.

Dhruva Space spent eight years building capabilities before the 2020 liberalisation of India’s space sector enabled it to launch the country’s first privately built satellites and now delivers and builds within six months. AuraML took about 26 months from ideation to initial revenue, while SecurWeave spent over two years developing its CHESS IoT security platform before securing funding to scale globally.

Deeptech-oriented ecosystem needs include:

●      Longer time horizons to allow for research, iteration, and rule-intensive development.

●      Multistage support, from prototype to scale-up, including infrastructure and testing facilities.

●      Public-private collaboration where government funding de-risks private capital and crowds in institutional investors.

●      Cross-sectoral mandate, particularly in high-impact areas such as energy, defence, space, climate, semiconductors and health.

Funding for deeptech startups needs reorientation, and Fund of Funds 2.0 could be a great opportunity to build a robust, effective ecosystem to enable:

• VC funds with longer terms say 10 or 12 years (instead of 8 years),
• Debt funds to partner with long-life VC funds,with soft terms,
• Very early-stage equity funding through angel funds,
• A secondary fund to enable investors to create liquidity without impacting the company

It is important to tangibly signal that India is scientifically solving its problems and aims to own the technologies on which the country will be self-reliant.

Global lessons, India context

Countries that have established deeptech power, such as the United States, South Korea, and now China, have achieved this through a combination of state investment, university partnerships, regulatory forward-thinking, and mission-capital funding.

India needs to take its own path, but one with the same ambition. We have to link our labs with industry, provide procurement assistance to first-time innovators, and link policy to long-term technology bets. Most importantly, we have to break the habit of treating science-driven innovation as "high risk" and begin treating it as high-value.

Why this moment matters

The boundaries between national security and economic strategy are dissolving. From AI and semiconductors to quantum encryption and bio-manufacturing, the world is remaking itself around the dominance of strategic technologies. India cannot play catch-up anymore.

We have a generational moment, one backed by talent, global goodwill, and a growing entrepreneurial foundation. But this window of opportunity will be lost if we continue to deploy short-term metrics against long-horizon endeavors.

As an individual who has worked closely with entrepreneurs, investors, and policymakers, I've witnessed how science-driven companies find it difficult to find champions, not because they don't have merit, but because they don't align with the prevailing philosophy of capital. It's time to fix that.

Let's build a fund not only for founders, but for India's scientific and industrial future.

We've established a startup ecosystem. Now, let's construct a deeptech nation.

The author is the Co-Founder, IAN Group. Views expressed are personal