India’s deeptech ecosystem is doing some of the most serious and high-impact work we are seeing in the startup space today. Across sectors like semiconductors, climate tech, defence, and quantum computing, founders are not chasing easy wins; they are solving fundamentally hard problems. The ideas are strong, the research is solid, and the intent is clear.
And yet, a large number of these innovations never make it to market.
This is not because we lack talent. It is not even entirely about policy anymore. At its core, this is a capital issue. The kind of funding needed to take deeptech from the lab to real-world deployment is still missing in many cases. If this gap continues, we risk seeing some of our best ideas either stay stuck in labs or get built and scaled outside India.
A paradox at the heart of innovation
On the surface, things look better than before. Funding activity has picked up, investor interest is returning, and more startups are entering the deeptech space.
In 2025, deeptech startups in India raised $1.65 billion, a clear jump from the previous two years. There is growing confidence in sectors like advanced manufacturing, climate, defence, and semiconductors. Reports also show that deeptech is taking a larger share of overall startup funding.
But these numbers do not tell the full story.
What we are seeing is a gap between early excitement and what it actually takes to build and scale these companies. Getting started is becoming easier, but moving beyond that stage is where things start to break.
The valley of death has a name, and an address
Every founder in deeptech eventually hits the same phase, the point between building the technology and making it commercially viable. This is often called the “Valley of Death,” and for deeptech, it is very real.
At this stage, the product works, but revenue is still some time away. Costs are high, timelines are long, and the need for capital increases sharply. This is exactly when startups need strong financial backing, but it is also when funding becomes harder to access.
Most investors tracking the space point to the same issue. There is simply not enough depth in funding beyond the early stages, especially for capital-heavy businesses. The kind of rounds needed to move from pilot to production is still limited in India.
This creates a clear disconnect. Early-stage funding has improved, and more startups are getting off the ground. But once they reach Series A and beyond, the pipeline starts to thin out. Even startups that have reduced technical risk struggle to raise the next round because they are not yet generating revenue at the scale investors expect.
Why venture capital blinks first
The challenge here is not about intent; it is about structure.
Venture capital, as we know it, was largely built for software businesses. Those companies can move fast, require less capital, and show returns relatively quickly. Deeptech does not work that way.
If you are building a semiconductor product, a quantum device, or a climate hardware solution, timelines are longer, risks are higher, and capital needs are significantly larger. These businesses need patience and a very different risk appetite.
But most funds are not set up for this. Their models, timelines, and expectations are aligned with faster scaling companies.
We see a similar pattern globally. Even in Europe, where deeptech funding is relatively strong, late-stage capital still lags behind the US. That gap becomes even more visible in India, where the pool of growth-stage capital is smaller to begin with.
The domino effect on founders
When capital does not show up at the right time, founders are forced to adapt, often in ways they did not originally plan.
Some end up giving away more equity than they should, just to keep moving forward. Some shift towards less capital-intensive models, even if it means moving away from their core technology. And many start looking outside India for funding.
This last path has long-term implications. Companies get incorporated abroad, intellectual property moves out, and teams begin to build elsewhere. What started as an Indian innovation ends up creating value in another ecosystem.
There is also a quieter challenge here. Many deeptech startups are able to build strong technology, but struggle to find early customers. Commercial readiness often lags behind technical readiness. Without early adopters or industry partners willing to take a chance, even the best solutions take longer to scale.
Signs of change, and what still needs to shift
There are some encouraging signs.
Recent policy moves, dedicated funds, and a clearer focus on deeptech are all steps in the right direction. Efforts to create a separate category for deeptech startups and improve access to funding and procurement are important.
But policy alone will not be enough.
The bigger shift needs to come from private capital. Domestic institutional investors, insurance funds, pension funds, and family offices need to start looking at deeptech as a long-term opportunity. This space requires patient capital, and more importantly, conviction.
Because deeptech is no longer a niche category. It is becoming central to how economies build long-term capability.
The pipeline in India is already strong. Startups are emerging from institutions at a steady pace, and the level of innovation continues to rise. The real question is whether the financing ecosystem can evolve quickly enough to support this momentum.
The technology is ready. The founders are willing. What is still missing is the bridge that helps them get to market.
By: Dr. Sunil Shekhawat, CEO & Co-Founder of SanchiConnect
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
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