1. Headline & intro
India has just done something most governments talk about but rarely execute: it has aligned startup policy with the brutal timelines of real science. By redefining what counts as a “startup” in deep tech and backing it with a multi‑billion‑dollar fund, New Delhi is signalling that it wants to play in the same strategic league as the U.S. and China. This isn’t just bureaucratic housekeeping; it’s an attempt to redesign the risk–reward equation for space, semiconductors, biotech and defence. In this piece, we’ll unpack what changed, why it matters, and what it means for Europe and global tech.
2. The news in brief
According to TechCrunch, India has updated its startup framework specifically for deep tech companies in sectors like space, semiconductors, biotech and advanced manufacturing.
Two headline changes stand out:
- Deep tech startups can now retain official “startup” status for up to 20 years, double the previous limit.
- The revenue ceiling for accessing startup‑specific tax breaks, grants and regulatory benefits has been raised from ₹1 billion to ₹3 billion (roughly from $11 million to about $33 million).
These rule changes are being paired with a previously announced ₹1 trillion (around $11 billion) Research, Development and Innovation Fund (RDI), designed to provide patient capital for R&D‑heavy businesses. In parallel, more than $1 billion in private capital has been mobilised through the India Deep Tech Alliance, which brings together major U.S. and Indian venture firms, with Nvidia advising.
TechCrunch notes that Indian deep tech funding rebounded to $1.65 billion in 2025, still small compared to the U.S. (about $147 billion) and China (~$81 billion), underlining how early India is in this race.
3. Why this matters
Deep tech is not SaaS. A chip design house, launch vehicle startup or synthetic biology company may need a decade just to prove that its technology works at scale. Under India’s previous framework, many such startups risked ageing out of “startup” status while still pre‑revenue. That created a subtle but very real distortion: founders were being judged on policy clocks rather than technology clocks.
Extending the startup window to 20 years and tripling the revenue threshold tackles three issues at once:
Psychological signalling. When the state says, in effect, “We accept that your company may take 10–15 years to mature,” it removes an artificial sense of failure. That matters for founders who previously felt pressured to pivot toward easier, faster‑monetising business models.
Capital alignment. Venture funds that specialise in deep tech often run longer tenors and need clarity that regulatory benefits won’t vanish halfway through a company’s journey. India’s move reduces the risk of a policy rug‑pull and makes the market more legible to global LPs and GPs.
Operational friction. Many benefits in India—from tax incentives to access to public support schemes—are tied to formal startup recognition. Losing that status mid‑journey could complicate everything from grant eligibility to co‑development with state agencies, especially in defence and space.
The RDI fund is the other half of the story. Policy tweaks without money are theatre; policy plus money is strategy. By routing public capital through venture‑style structures, India is trying to avoid the trap of politically directed, low‑accountability subsidies while still closing funding gaps at Series A and beyond, where deep tech capital requirements spike.
The winners from this shift are:
- Founders in capital‑intensive domains, who gain time, legitimacy and a clearer path to follow‑on funding.
- Domestic and foreign investors seeking long‑horizon exposure in a new geography, with more predictable rules.
- India’s strategic ambitions in defence, chips, climate tech and space, where private innovation is now officially a national project.
The potential losers? Early‑stage consumer and SaaS startups may find that some public attention and capital reallocates toward harder tech. And if the RDI fund is poorly governed, taxpayers could end up underwriting political experiments rather than globally competitive science.
4. The bigger picture
India’s move slots neatly into a broader global trend: the return of industrial policy for frontier technologies.
The U.S. has the CHIPS and Science Act and massive defence‑driven R&D budgets. The EU is rolling out the EU Chips Act (around €43 billion), the Green Deal Industrial Plan, and mission‑driven Horizon Europe programmes. China has spent the past decade blending state credit, local government financing vehicles and national champions to push AI, 5G, EVs and semiconductors.
Until recently, India’s tech success story was framed primarily around software services and consumer internet—Infosys and TCS on one side, Flipkart, Zomato and Paytm on the other. Deep tech was a side quest. This policy shift is a declaration that the next chapter will be written in fabs, labs and clean rooms, not just in app stores.
It also reflects a geopolitical calculation. As supply chains fragment and the U.S.–China rivalry hardens, countries with credible deep tech ecosystems gain leverage: they can negotiate access, form technology alliances and host critical infrastructure. For global investors, the game is no longer just “Where is growth?” but “Where is strategic resilience?”
On that axis, India wants to be the third major pole, not just a low‑cost coding and manufacturing hub. Matching that ambition requires exactly the kind of patient frameworks we’re now seeing.
Compared to the U.S. and EU, India is taking a hybrid approach:
- Like the U.S., it is leaning on private venture funds and market‑driven selection of winners.
- Like Europe, it is explicitly tying capital flows to national priorities: defence, semiconductors, climate tech and advanced manufacturing.
The numbers are smaller, but the direction is similar: if you’re building hard tech that aligns with state priorities, the state will help pull risk out of your cap table.
5. The European / regional angle
For Europe, India’s deep tech turn is both a complementary opportunity and a competitive nudge.
On the opportunity side, European startups and corporates now have a clearer rationale to treat India as a deep tech partner, not just a downstream IT services market.
- A German industrial group working on power electronics can co‑develop with an Indian chip design firm that now has a longer runway and access to RDI funding.
- A Slovenian or Croatian climate‑tech startup looking for cost‑effective hardware prototyping can anchor part of its engineering in India without fearing that the local partner will be policy‑strangled halfway.
Regulation matters here. The EU’s GDPR, Digital Services Act, and soon the EU AI Act have made Europe the world’s regulatory reference point in data and AI. India’s deep tech policy is not primarily about data governance, but any AI‑heavy or biotech collaboration between EU and Indian firms will still have to navigate dual compliance: EU rules on one side, Indian export controls and sectoral regulations on the other.
Strategically, there is a subtle pressure on Europe. If India can offer:
- a large pool of engineers,
- improving capital depth for hard tech, and
- a government that explicitly accepts 10–20 year horizons,
then European founders and investors may start to ask why similar clarity is often missing at home, where innovation schemes are fragmented across member states and Brussels.
For European VCs, especially those already investing in India or looking at cross‑border hard‑tech plays, this policy shift is essentially a green light: the country is willing to share the risk of long‑cycle bets.
6. Looking ahead
The big question is implementation. Announcing a ₹1 trillion fund is easy; deploying it well over a decade is not.
Key things to watch over the next 12–36 months:
Fund governance. Which venture and private equity managers actually receive RDI capital, and on what terms? If the selection favours politically connected but inexperienced managers over specialised deep tech funds, the signal weakens quickly.
Blending of capital. The promise is that public money will crowd in private money, not replace it. Look for co‑investment structures where the state accepts slightly lower returns or higher risk tranches to make deals viable, while still letting market logic pick winners.
Exit pathways. Deep tech needs credible exits: IPOs, strategic acquisitions or defence/space procurement. India’s public markets have become more receptive to tech listings, but hardware‑heavy, loss‑making companies remain a test case.
Headquarters arbitrage. One unspoken goal is to reduce the incentive for Indian deep tech startups to re‑domicile in Delaware, Singapore or the Netherlands once they scale. If, five years from now, the most successful deep tech companies are still flipping abroad for capital and regulatory reasons, the policy will have underdelivered.
On a 5–10 year view, expect a slow build, not an overnight boom. Deep tech cycles are inherently long; the first real proof points may be:
- Indian‑origin deep tech firms winning global Tier‑1 customers in automotive, aerospace, telecoms or pharma.
- European and U.S. strategics setting up joint labs and manufacturing with Indian startups, rather than only with large conglomerates.
The risks are classic: misallocated capital, bureaucratic delay, and a temptation to prop up national champions instead of globally competitive products. The opportunity, however, is substantial: to turn India from a talent exporter into a full‑stack deep tech ecosystem.
7. The bottom line
India’s decision to give deep tech startups a 20‑year runway, backed by a huge RDI fund, is more than an administrative tweak; it is a bet that the next wave of national leverage will come from hard technology, not just software unicorns. If governance matches the ambition, this could make India the most interesting deep tech “third pole” between the U.S. and China—and a serious partner (and competitor) for Europe. The real question now is whether other regions will respond with equal clarity, or watch India quietly reset the terms of the frontier‑tech game.
