India's deeptech startups, brimming with potential to revolutionize sectors from advanced manufacturing to biotech, are facing significant headwinds due to regulatory delays and late-stage funding gaps, according to venture capitalists. Speaking at Ankur Capital's Deep Science Forum in Bengaluru, investors highlighted that while government schemes and funding opportunities exist, accessing them remains a challenge, with grant approvals often taking nearly two years. This delay, coupled with the capital-intensive and long-gestation nature of deeptech sectors, demands patient capital, which is not always readily available.
The National Deep Tech Startup Policy (NDTSP) was drafted in 2023 to address issues such as IP reforms and regulatory sandboxes, but its implementation has been slow, with only 20% adoption by 2025. Startups face licensing delays of 6-12 months, a stark contrast to Singapore's streamlined 3-day process. This sluggishness is further compounded by infrastructure bottlenecks, including limited access to advanced labs, prototyping tools, and testbeds, leaving many ventures under-equipped. A talent crunch, exacerbated by brain drain, adds another layer of complexity.
VCs are often risk-averse, with only a small fraction of funding directed towards deeptech ventures. They often prefer faster returns, which disincentivizes investment in deep tech that require years to solve. While early-stage funding for deeptech startups increased in 2025, initial check sizes have decreased. Despite a significant surge in deep tech startups in 2023, with India becoming the third-largest pool globally, funding gaps persist, especially in the seed and early growth stages. A 67% YoY decline in VC funding in India during 2023 reflects investor caution amidst global uncertainties.
The government has recognized the need for intervention, launching initiatives like the National Quantum Mission and a Deep Tech Fund, but private sector involvement remains insufficient. While the government has allocated significant funds towards R&D, the private sector's contribution is considerably lower compared to countries like the US and China. Experts suggest deeptech funding in India will remain in the $1-1.5 billion range for the next couple of years and an increase isn't expected until 2027-28.
To unlock the full potential of India's deeptech ecosystem, several key areas need attention. Streamlining regulatory processes, accelerating NDTSP implementation, and fostering collaboration between government, academia, and industry are crucial. Providing access to shared infrastructure, advanced labs, and prototyping tools can significantly reduce costs and improve the competitiveness of startups. Addressing the talent crunch through skills development programs and incentivizing research and development in deeptech sectors is also essential. Ultimately, a more patient and supportive investment ecosystem is needed to nurture deeptech startups and enable them to contribute to India's economic growth and technological advancement.
