India has changed its startup rules for deep tech
Deep tech startups in sectors such as space, semiconductors, and biotech take far longer to mature than conventional ventures. Because of that India is adjusting its startup rules, and mobilizing public capital, hoping to help more of them make it to commercial products. This week, the Indian government updated its startup framework, doubling the period for which deep tech companies are treated as startups to 20 years and raising the revenue threshold for startup-specific tax, grant, and regulatory benefits to ₹3 billion (about $33.12 million), from ₹1 billion (around $11.04 million) previously. The change aims to align policy timelines with the long development cycles typical of science- and engineering-led businesses. The change also forms part of New Delhi’s effort to build a long-horizon deep tech ecosystem by combining regulatory reform with public capital, including the ₹1 trillion (around $11 billion) Research, Development and Innovation Fund (RDI), announced last year. That fund is intended to expand patient financing for science-led and R&D-driven companies. Against that backdrop, U.S. and Indian venture firms later came together 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, with chipmaker Nvidia acting as an adviser. For founders, these changes may fix what some see as an artificial pressure point. Under the previous framework, companies often risked losing startup status while still pre-commercial, creating a “false failure signal” that judged science-led ventures on policy timelines rather than technological progress, said Vishesh Rajaram, founding partner at Speciale Invest, an Indian deep tech venture capital firm. “By formally recognizing deep tech as different, the policy reduces friction in fundraising, follow-on capital, and engagement with the state, which absolutely shows up in a founder’s operating reality over time,” Rajaram told TechCrunch. Still, investors say access to capital remains a more binding constraint, particularly beyond the early stages. “The biggest gap has historically been funding depth at Series A and beyond, especially for capital-intensive deep tech companies,” Rajaram said. That is where the government’s earlier RDI fund is meant to play a complementary role. “The real benefit of the RDI framework is to increase the funding available to deep tech companies at 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 chronic gaps in follow-on funding without altering the commercial criteria that govern private investment decisions.
