For nearly a decade, India's venture capital ecosystem celebrated a predictable formula: back software-as-a-service (SaaS) and consumer internet startups that promised rapid scaling and clear exits within three to five years. Deep-tech ventures, rooted in advanced engineering, hardware, and materials science, were often deemed too slow, too complex, and too capital-intensive. Today, that narrative is undergoing a profound rewrite.
In 2025, funding into Indian deep-tech startups surged to approximately $1.15 billion, a significant jump from $843 million in 2024, according to data from Tracxn. This newfound interest marks a pivotal shift, as investors, policymakers, and returning talent converge to back bets that require patience, patents, and a fundamentally different playbook.
The Founders Who Endured the Wait
The change in mindset is best illustrated by founders who persevered through years of investor skepticism. Pranav Vempati, founder of Hyderabad-based Makers Hive, spent years building technology-powered prosthetic hands. A decade ago, when he told nearly 40 VC firms that product development alone would take five years, the conversations ended abruptly.
"Now, nobody is talking about timelines. The questions are about patents, IP and what technology you are building. Earlier, it was about how fast you could scale," Vempati told Mint. His persistence paid off recently with a ₹10 crore bridge round from Silverneedle Ventures.
Similarly, Vinayak Tsalla of Bengaluru-based Tsalla Aerospace, which develops sustainable military and industrial products, saw early conversations end with labels like "great tech but too early." "With validated technology, government contracts, real deployments and revenue visibility, VCs now engage more seriously. The tone has shifted from 'prove this can work' to 'how big can this get,'" he noted.
Not all were as fortunate. Startups like Subtl.ai and Log9 Materials, founded around the same period, shut down after struggling with long product cycles and a critical lack of patient capital.
Why Venture Capital is Warming to Deep-Tech Now
This shift is not accidental. It is being shaped by a powerful confluence of factors that are de-risking early-stage innovation in strategic sectors.
Policy as a Catalyst: The Indian government has taken an active role through initiatives like the ₹10,000-crore 'fund of funds' for deep-tech announced in April 2025, with ₹2,000 crore earmarked for lab-to-market transitions. Programs like iDEX (Innovations for Defence Excellence) and IN-SPACe are creating predictable demand, mirroring earlier successes in renewables and electronics via PLI schemes.
"Deep tech by nature requires blended capital, patient venture funding alongside catalytic public support," said Sadhika Agarwal of Equirus InnovateX Fund.
The Talent and Infrastructure Boost: A wave of founders is emerging from Indian research institutions like the IITs, while experienced scientists and engineers are returning from abroad. Simultaneously, post-pandemic supply-chain developments have improved India's manufacturing ecosystem, bringing down component costs and enhancing quality.
"Policy support, market demand, maturing research institutions and returning talent are aligning for the first time," said Amit Chand, founder of BYT Capital.
The Rise of Specialized Capital: Recognizing the unique needs of deep-tech, investors are launching dedicated vehicles. Speciale Invest announced a ₹1,400-crore fund, Shastra VC rolled out a deep-tech fellowship, and IIT Bombay's SINE launched India's first incubator-linked deep-tech VC fund. These funds often have limited partners (LPs) who understand and accept longer gestation periods.
The New Playbook: Patience, Milestones, and Adapting VC Models
The consensus among deep-tech investors is clear: the old SaaS playbook does not apply. "The biggest mental shift is abandoning the idea that deep tech can be templatized at all," said Vishesh Rajaram, co-founder of Speciale Invest.
The new approach involves structuring milestones around technical validation and real-world deployments rather than near-term revenue. It means working closely with governments and strategic corporates for market access. Crucially, it is forcing VCs to redesign their own funds.
"Longer tenures and extended harvesting periods are becoming the norm," noted Agarwal. Funds are allocating larger portions for follow-on investments to support capital-intensive growth phases. Liquidity is also being addressed through strategic corporate co-investors and a growing belief in public market exits for Indian tech firms.
Globally, successful outcomes have reset expectations. The Praxis Global Alliance report notes a nearly 6x increase in global deep-tech unicorn exits between 2018 and 2022, with mega-acquisitions and IPOs proving the long-term value potential.
The Persistent Challenge: Crossing the 'Valley of Death'
Despite the optimism, a critical funding gap threatens progress. While pre-seed and early-stage capital has improved, a severe shortage persists at the Seed and Series A/B stages.
This "valley of death" occurs between technology readiness levels 4 and 7, when a startup must move from a lab prototype to an industrial-scale product. Costs spike, revenue is still uncertain, and failure is common.
"Early-stage money exists, and growth-stage capital comes once the technology is proven. The problem is the middle. That's where startups need the most money, and where fundraising starts to drag," explained Amit Chand of BYT Capital.
Investors like Madhur Singhal of Praxis Global Alliance believe this gap may narrow in the next 12-18 months as more growth-focused deep-tech funds emerge. However, market adoption remains a hurdle. "Convincing the first customer to pay for a homegrown deep-tech solution is hard," the article notes.
The ultimate test for this new wave of capital will be its patience. As Vinayak Tsalla poignantly observed, "Deep-tech doesn't fail fast—it fails expensively and slowly. But when it works, the payoff is massive." India's innovation future hinges on whether its financiers have truly learned to play the long game.
