Policy Update And New Thresholds
India has changed its startup framework to reflect the longer development cycles of deep tech companies, extending the period during which they are treated as startups to 20 years and raising the revenue cap for startup-specific benefits to ₹3 billion, or about $33.12 million. The previous cap stood at ₹1 billion, around $11.04 million. The update, announced this week, targets sectors such as space, semiconductors, and biotech, where products often take many years to reach the market. The government said the change aligns policy timelines with science- and engineering-led businesses that remain pre-commercial for extended periods.
Public Capital And Ecosystem Building
The adjustment sits alongside New Delhi’s broader effort to build a long-horizon deep tech ecosystem that pairs regulatory changes with public funding. That includes the ₹1 trillion, or about $11 billion, Research, Development and Innovation Fund announced last year to expand patient financing for research-driven companies. In parallel, U.S. and Indian venture firms formed 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.
Founder Impact And Status Timing
Founders and investors say the earlier framework created a timing mismatch. Under the previous rules, some companies risked losing startup status while still pre-commercial, which Vishesh Rajaram, founding partner at Speciale Invest, said sent a false signal by judging progress on policy clocks rather than technical milestones. He said recognizing deep tech as distinct reduces friction in fundraising, follow-on capital, and engagement with the state, and that this shows up in day-to-day operations for founders.
Capital Depth Beyond Early Stages
Investors said access to capital remains a constraint, especially after seed rounds. Rajaram said funding depth at Series A and later stages has been the largest gap for capital-intensive companies, and that the RDI fund is meant to complement private capital. Arun Kumar, managing partner at Celesta Capital, said the framework increases funding availability at early and growth stages by routing public capital through venture funds with tenors similar to private funds, without changing the commercial standards used in investment decisions.
Avoiding A Support Cutoff
Siddarth Pai, founding partner at 3one4 Capital and co-chair of regulatory affairs at the Indian Venture and Alternate Capital Association, said the new framework avoids a cutoff that historically removed support just as companies began to scale. He said the RDI fund is moving into an operational phase, with the first group of fund managers identified and a selection process under way for venture and private equity managers. He added that the vehicle can take direct positions and provide credit and grants, rather than acting only as a fund of funds.
Funding Levels And Recent Momentum
India remains an emerging market for deep tech by funding scale. Indian deep tech startups have raised $8.54 billion in total, and in 2025 they raised $1.65 billion, a rebound from $1.1 billion in each of the two prior years after funding peaked at $2 billion in 2022, according to Tracxn. Neha Singh, co-founder of Tracxn, said the pickup suggests a move toward longer-horizon investing, with activity focused on areas tied to national priorities such as advanced manufacturing, defense, climate technologies, and semiconductors.
By comparison, U.S. deep tech startups raised about $147 billion in 2025, while China accounted for roughly $81 billion in the same year, based on Tracxn data. The gap shows the challenge of building capital-intensive technologies even with a large engineering workforce, and it frames the government’s effort to attract broader investor participation over time.
Investor Interpretation And Time Horizons
Global investors described the policy change as a signal of long-term intent rather than an immediate trigger for reallocations. Pratik Agarwal, a partner at Accel, said deep tech companies operate on seven- to 12-year horizons and that extending the policy life cycle gives investors confidence that rules will not shift mid-course. He said the change does not remove policy risk or alter allocations overnight, but it increases comfort that India is planning for longer timelines.
Location Decisions And Public Markets
Whether the update will reduce the tendency of startups to move headquarters overseas remains open. Agarwal said the longer runway strengthens the case for building in India, though access to capital and customers still shapes where companies scale. He added that India’s public markets have shown more appetite in recent years for venture-backed technology firms, which makes domestic listings more credible than before and may reduce pressure to incorporate abroad, even as late-stage funding and procurement continue to matter.
Benchmarks For Outcomes
For investors focused on long-horizon technologies, results will depend on whether companies reach global competitiveness. Kumar said the measure he would watch is the emergence of a group of Indian deep tech companies that succeed internationally over the next decade.
Featured image credits: Wikimedia Commons
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