India has changed its startup rules for deep tech

India Doubles Startup Definition for Deep Tech, Extends Policy Support to 20 Years

India is recalibrating its deep tech strategy, giving companies in sectors like space, semiconductors, and biotech a longer runway to succeed. The government has doubled the period during which such firms are classified as “startups” to 20 years and raised the revenue threshold for startup-specific tax, grant, and regulatory benefits to ₹3 billion (about $33.12 million), up from ₹1 billion (around $11.04 million).

The change is designed to align policy timelines with the long development cycles typical of science- and engineering-led businesses. It also dovetails with New Delhi’s broader push to build a long-horizon deep tech ecosystem through the ₹1 trillion (around $11 billion) Research, Development and Innovation Fund (RDI), announced last year to expand patient financing for R&D-driven companies.

That effort has already attracted heavyweight private capital. U.S. and Indian venture firms have launched the India Deep Tech Alliance, a $1 billion-plus coalition that includes Accel, Blume Ventures, Celesta Capital, Premji Invest, Ideaspring Capital, Qualcomm Ventures, and Kalaari Capital, with chipmaker Nvidia acting as an adviser.

For founders, the policy shift removes a pressure point that has forced some science-led ventures to “fail” prematurely. Under the previous framework, companies often risked losing startup status before achieving commercial viability, creating what investors describe as a “false failure signal.” “By formally recognizing deep tech as different, the policy reduces friction in fundraising, follow-on capital, and engagement with the state,” said Vishesh Rajaram, founding partner at Speciale Invest.

Yet access to capital remains a binding constraint, particularly beyond early stages. “The biggest gap has historically been funding depth at Series A and beyond, especially for capital-intensive deep tech companies,” Rajaram noted. The RDI fund is meant to fill that void by channeling public capital through venture funds with tenors similar to private capital, addressing chronic gaps in follow-on funding without distorting commercial investment criteria.

India’s deep tech funding is showing signs of recovery. Startups in the sector raised $1.65 billion in 2025, rebounding from $1.1 billion in each of the previous two years after peaking at $2 billion in 2022, according to Tracxn. The rebound suggests growing investor confidence, particularly in areas aligned with national priorities such as advanced manufacturing, defense, climate technologies, and semiconductors.

Still, India remains an emerging rather than dominant deep tech market. Indian deep tech startups have raised $8.54 billion in total to date, compared to about $147 billion for U.S. deep tech startups in 2025—more than 80 times the amount deployed in India that year. China accounted for roughly $81 billion in the same period.

For global investors, the policy change is being read as a signal of longer-term intent rather than a trigger for immediate shifts in allocation. “Deep tech companies operate on seven- to twelve-year horizons, so regulatory recognition that stretches the lifecycle gives investors greater confidence that the policy environment will not change mid-journey,” said Pratik Agarwal, a partner at Accel.

Whether the move will reduce the tendency of Indian startups to shift headquarters overseas as they scale remains an open question. The extended runway strengthens the case for building and staying in India, Agarwal said, though access to capital and customers still matters. Over the past five years, India’s public markets have shown a growing appetite for venture-backed tech companies, making domestic listings a more credible option than in the past.

For investors backing long-horizon technologies, the ultimate test will be whether India can deliver globally competitive outcomes. “It would be great to see ten globally competitive deep tech companies from India achieve sustained success over the next decade,” said Arun Kumar of Celesta Capital, describing that as the benchmark for assessing whether India’s deep tech ecosystem is maturing.

Tags: deep tech, India, startups, government policy, RDI fund, venture capital, semiconductors, biotech, space tech, funding, innovation, policy reform, long-term investment, global competitiveness

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