India Revamps Deep Tech Startup Rules to Boost Innovation and Investment

India is rewriting the rules for deep tech startups, aiming to help science- and engineering-driven companies turn ambitious research into commercial products. Sectors such as space, semiconductors, and biotechnology often require longer development cycles than traditional ventures, and policymakers are responding by aligning incentives with these timelines.

Under the updated framework, deep tech companies will now retain startup status for up to 20 years, double the previous period. The government has also raised the revenue threshold for receiving startup-specific benefits—including tax breaks, grants, and regulatory support—from ₹1 billion ($11 million) to ₹3 billion ($33 million). These changes aim to give companies the breathing room needed to grow without losing critical policy advantages.

This move is part of a broader effort to cultivate a long-term deep tech ecosystem. Alongside regulatory reforms, India is leveraging public capital, including the ₹1 trillion ($11 billion) Research, Development, and Innovation Fund (RDI), introduced last year to provide patient funding for research-led ventures. The initiative has also inspired private investment, with U.S. and Indian venture firms forming the India Deep Tech Alliance—a coalition managing over $1 billion, featuring investors like Accel, Blume Ventures, and Qualcomm Ventures, with Nvidia as an adviser.

Industry insiders welcome the shift, saying it resolves a key pain point for founders. Vishesh Rajaram, founding partner at Speciale Invest, explains that the previous framework created “false failure signals,” forcing companies to meet arbitrary timelines rather than focusing on technological progress. By formally distinguishing deep tech ventures, the new rules reduce friction in fundraising, state engagement, and scaling operations.

Despite the reforms, investors caution that funding remains a challenge, particularly for later-stage growth. Arun Kumar, managing partner at Celesta Capital, notes that the RDI Fund is designed to fill these gaps by routing public capital through venture funds on private investment terms, ensuring follow-on financing is available without compromising commercial standards. The combined regulatory and financial support is expected to position India as a more competitive hub for deep tech innovation.

source: Techcrunch