Venture Capital Flows into India's Fabless Semiconductor Sector
Fabless semiconductor startups in India are experiencing a significant surge in venture capital interest, marked by an increase in deal flow and larger investment sizes. This trend coincides with these companies accelerating their commercialization efforts, progressing from initial design phases to tape-out and securing pilot orders from original equipment manufacturers (OEMs).
Record Funding and Growing Investor Confidence
According to data from Tracxn, the sector has raised an impressive $30.8 million across four funding rounds in the first two months of 2026 alone. This figure already surpasses the total funding of $20 million recorded for the entire year of 2025 and the $25 million raised between 2022 and 2024. Notable examples include VerveSemi and C2i, each securing over $10 million in their latest funding rounds, highlighting the rising ticket sizes in the industry.
Historically, fabless semiconductor startups faced limited investor interest due to the extended gestation periods typical of deep-tech ventures. However, there is now a noticeable shift, with more investors willing to back these startups even at the Series A stage. This change reflects the sector's growing momentum since 2022, largely fueled by the government's design-linked incentive (DLI) programme.
Drivers of Growth and Market Opportunities
Industry experts attribute this increased investor confidence to early movers in the sector securing test orders from OEMs. G S Madhusudan, CEO of InCore Semiconductors, noted that OEMs are already placing test orders with Indian vendors. "It is a natural progression as some move towards commercialisation and seek funds needed for the next stage of growth," he explained. He anticipates initial adoption in applications such as electricity meters, smart cards, and chips for consumer electronic devices like washing machines, fans, refrigerators, power electronics, and industrial equipment.
Anil Joshi, managing partner at Unicorn India Ventures, emphasized the positive momentum in the segment. "Companies that have been developing product designs over the last few years are ready for their first tape-out, and this gives investors visibility on product rollout. The government's push under the DLI makes for a strong pipeline for investors," he stated.
Startup Perspectives and Strategic Shifts
Pratap Narayan Singh, co-founder of VerveSemi, founded in 2017, observed a change in investor sentiment in recent years, with the company's latest round being oversubscribed. VerveSemi has taped out 25 variants and aims to scale up production, targeting over two million chips from five variants by year-end. Singh pointed to supply chain disruptions during the COVID-19 pandemic and geopolitical factors as key drivers, pushing OEMs to diversify sourcing and creating opportunities for Indian vendors.
Shashwath TR, co-founder and CEO of Mindgrove Technologies, highlighted that ticket sizes have increased as more startups raise growth-stage funding. Even seed rounds are growing larger due to higher prototype development costs. "A few of us have moved beyond labs, and investors' appreciation of the business model and actual risk-reward has increased," he said. He added that startups are engaging in early discussions with OSAT (Outsourced Semiconductor Assembly and Test) players, which could enhance unit economics.
Specialized Applications and Future Outlook
Hareesh Chandrasekar, co-founder and CEO of AGNIT Semiconductors, shared that the company recently raised $2.6 million in a seed extension round to scale production of its two chips. While many startups focus on consumer applications, AGNIT specializes in gallium nitride chips for strategic uses like radars, with efforts to localize defence components serving as a key growth driver.
For fabless semiconductor startups to achieve long-term success, they must qualify and prove reliability before securing large-scale orders, which are broadly expected to commence from 2027. This underscores the critical phase of validation and scaling that lies ahead for the burgeoning Indian semiconductor ecosystem.
