Deep tech startups in sectors like space, semiconductors, and biotech take longer to mature than conventional businesses. Because of that India is adjusting its startup rules, and mobilizing public capital, hoping to help more of them make it into commercial products.

This week, the Indian government updated its startup framework, which doubled the period during which deep tech companies are considered startups to 20 years and raised the revenue threshold for startup-specific tax, grant, and regulatory benefits to ₹3 billion (about $33.12 million), from ₹1 billion (about $11.04 million) previously. The change aims to align policy timelines with the long development cycles typical of science and engineering-led enterprises.

The change also forms part of New Delhi’s effort to build a long-term deep technology ecosystem by combining regulatory reform with public capital, including the ₹1 trillion (about $11 billion) Research, Development and Innovation Fund (RDI), announced last year. That funding is intended to expand patient financing for science-led companies and R&D. Against that backdrop, US and Indian venture firms later merged to launch the India Deep Tech Alliance$1 billion-plus private investor coalition that includes Accel, Blume Ventures, Celesta Capital, Premji Invest, Ideaspring Capital, Qualcomm Ventures, and Kalaari Capital, along with the chipmaker Nvidia is acting as an advisor.

For builders, these changes could fix what some see as an artificial pressure point. Under the previous framework, companies often risked losing start-up status before commercialization, creating a “false signal of failure” that judged science-led businesses on policy timelines rather than technological progress, said Vishesh Rajaram, the founding partner of Speciale Invest, an Indian deep tech venture capital firm.

“By formally recognizing the deep technological difference, the policy reduces the friction of fundraising, follow-on capital, and engagement with the state, which perfectly reflects a reality of operating a founder over time,” Rajaram told TechCrunch.

However, investors say that access to capital remains a major constraint, especially beyond the early stages. “The biggest gap historically has been the depth of funding in Series A and beyond, especially for capital-intensive deep technology companies,” Rajaram said. The government used to be there RDI funding intended to play a complementary role.

“The real benefit of the RDI framework is to increase the funding available to deep technology companies in the early and growth stages,” said Arun Kumar, managing partner at Celesta Capital. By routing public capital through venture funds with tenors similar to private capital, he said, the fund is designed to address frequent gaps in follow-on funding without changing the commercial behavior that governs private investment decisions.

Siddarth Pai, founding partner of 3one4 Capital and co-chair of regulatory affairs at the Indian Venture and Alternate Capital Association, said India’s deep tech framework avoids a “graduation cliff” that has historically cut off companies from support of their size.

These policy changes come as the RDI fund begins operational formation, Pai said, with the first set of fund managers identified and the selection process of venture and private equity managers underway.

While private capital for deep technology already exists in India – especially in areas like biotech – Pai told TechCrunch that the RDI Fund is intended to act as a nucleus around which greater capital formation can take place. Unlike a traditional fund-of-funds, he said, the vehicle is also designed to take direct positions and provide credit and grants to deep tech startups.

Deep tech funding in India is growing

In terms of scale, India remains an emerging rather than a dominant deep technology market. Indian deep tech startups have raised $8.54 billion in total so far, but new data points to renewed momentum. Deep tech startups in India have raised $1.65 billion by 2025, a sharp rebound from $1.1 billion in each of the previous two years after funding topped $2 billion by 2022, per Tracxn. The improvement suggests growing investor confidence, especially in areas aligned with national priorities such as advanced manufacturing, defense, climate technology, and semiconductors.

“Overall, the funding acquisition suggests a gradual move towards longer horizon investing,” said Neha Singh, co-founder of Tracxn.

In comparison, US deep tech startups raised about $147 billion by 2025, more than 80 times the amount deployed in India that year, while China accounted for nearly $81 billion, data from Tracxn shows.

The disparity highlights the challenge India faces in building capital-intensive technologies, despite its wealth of engineering talent. So the hope is that these steps by the Indian government will lead to more investor participation in the medium term.

A longer term signal

For global investors, the change in New Delhi’s framework is read as a signal of longer-term policy objectives rather than a reason for an immediate shift in allocation. “Deep tech companies operate on a seven-to-twelve-year horizon, so the regulatory recognition that extends the life cycle gives investors more confidence that the policy environment won’t change in the middle of the journey,” said Pratik Agarwal, a partner at Accel. While he said the change won’t change allocation models overnight or completely eliminate policy risk, it adds investor comfort that India is considering deep technology for the longer term.

“The change shows that India is learning from the US and Europe how to create patient frameworks for border construction,” Agarwal told TechCrunch.

Whether the move will reduce the tendency of Indian startups to move their headquarters abroad as they scale remains an open question.

The extended runway strengthens the case for building and staying in India, Agarwal said, although access to capital and customers is still important. Over the past five years, he added, India’s public markets have shown a growing appetite for venture-backed tech companieswhich makes domestic listings a more credible option than ever before. That, in turn, will ease some of the pressure on deep-tech founders to incorporate overseas, although access to procurement and late-stage capital will continue to shape where companies eventually scale.

For investors who support long-term horizon technologies, the final test is whether India can deliver competitive results globally. The real signal, says Celesta Capital’s Kumar, is the emergence of a critical mass of Indian deep-tech companies succeeding on the world stage.

“It’s great to see ten globally competitive deep tech companies from India achieving sustained success in the next decade,” he said, describing it as the benchmark he would look for to assess whether India’s deep tech ecosystem is maturing.