Unlocking India’s next wave of startup investment
As entrepreneurial energy plays an ever larger role in India’s success story, we present a package of weekly opinion articles by members of TiE, a global organization for startups and entrepreneurs. From the rural reach of India’s startup revolution and the easing of capital and compliance challenges to the role of angel investors, how startups and micro, small, and medium enterprises must grow together and how best to track innovation, TiE authors cover a wide spectrum of relevant issues.
On 18 July, a rocket built by a private Indian company lifted off from Sriharikota and reached a 450km low-Earth orbit. Skyroot’s Vikram-1 was the first privately developed Indian rocket to get there, making India the third country in the world, after the US and China, with private orbital launch capability.
What struck me beyond this incredible engineering feat was the way the country watched. Deeptech founders are being celebrated in a way they simply were not five years ago, and deeptech is transitioning from being a niche curiosity to the centre of the national interest.
The trajectory underneath that shift is real. Domestic manufacturing is projected to reach $1.3 trillion by fiscal year 2030 (FY30), growing at 18% annually, and the country’s share of global goods trade should rise to about 3% by 2030.
We are well placed to capture demand from countries that are already relocating their manufacturing bases. With a record number of trade agreements being signed since 2022, covering the United Arab Emirates, Australia, the European Free Trade Association (EFTA), the UK, Oman, New Zealand and the European Union, our coverage now spans 38 countries. Even the rupee’s fall this year carries a second-order benefit: more competitive exports, and a sharper case for import substitution.
Capital has begun to move at a real scale, too. The ₹1 trillion Research, Development and Innovation Fund (RDIF), launched last November and expected to last for six years, finances projects at technology readiness level (TRL) 4 and above. TRL 4 marks laboratory validation, with higher levels indicating increasing technological maturity towards deployment.
The RDIF’s first cohort shows what this money is for: more than 20 projects, ₹4,700-plus crore in project costs, and projects across quantum computing, robotics, space, biotechnology, medical devices, energy security and transition, climate action, and digital technology. It could operate through long-term low or nil-interest financing, equity or a fund-of-funds structure.
Startup India Fund of Funds 2.0 puts ₹10,000 crore behind deeptech and innovative manufacturing, requiring participating funds to invest at least twice the government’s commitment. The NPS Bharat Fund of Funds will, for the first time, allow pension savings into the alternative investment ecosystem. The India Semiconductor Mission’s second phase is ₹1,27,500 crore, up from ₹76,000 crore; the National Quantum Mission is ₹6,003 crore; the National Green Hydrogen Mission is ₹19,744 crore—these are just examples of dedicated outlays across deeptech spaces. Taken together, these are no longer just a collection of small programmes; they represent the beginning of building a capital stack for deeptech companies.
The public markets have already made their judgment. India’s listed defence and aerospace manufacturers trade at much higher earnings multiples than the Nifty 50. That is a statement about the value of scarce, defensible Indian intellectual property. The ambition is set, and the money has begun to arrive. But sustaining it will require tapping into sources of capital that we have not fully mobilized yet—capital from corporates, diaspora and growth capital.
Corporate support
TRL 1 to 4 is where grants and angel investing do their work, a layer that India has largely built. TRL 4 to 7 is the valley of death—the government recognized it and built the RDIF precisely for it. The framework for low-cost loans under the RDIF is interesting: research, development, and innovation financing covers up to half of an assessed project cost. The promoter or a commercial investor must fund the balance. Long-term debt at a low interest rate is a powerful instrument, but it amplifies equity rather than replacing it. Without the equity, the loan cannot be drawn at all.
Where does that equity come from? Institutional capital for deeptech has genuinely opened up over the past few years. The country’s deeptech funding grew by 37% in 2025 to $2.3 billion, but, relative to the size of the ask, it remains insufficient. This is why it is important to unlock pools of capital beyond institutional capital.
India can tap corporates and global capability centres (GCCs) as a key source of capital needed for this sector. The country’s GCCs are not back offices anymore—many now conduct genuine research and development, and their parents have both strategic reasons to invest and the balance sheets to do so. I am also seeing something I did not expect: corporates taking the innovator’s dilemma head-on, willing to back novel, emerging technologies that compete directly with their own.
However, the nexus between Indian deeptech and corporates or GCCs is weaker than in many other countries. When Japan set out to rebuild advanced chipmaking, many companies, from carmakers to banks to material suppliers, who would become customers later, put in sizeable investments. In some sectors, such as energy, the most bankable corporate commitment may not be equity but offtake.
India has more of this than anywhere in the world—more than 2,000 GCCs and large corporates with healthy balance sheets. Yet, we convert very little of it into capital for our own startups. A parent company that co-invests alongside an Indian fund or signs a multi-year offtake agreement supplies what no financial investor can.
Diaspora experience
Next, the need for diaspora capital, which has the advantage of being intelligent capital rather than simply more capital. And deeptech happens to be the first sector where that intelligence fully transfers. In almost every other sector, an Indian company is a different animal from its counterpart abroad: different price points, different distribution, a different definition of who the customer even is. Deeptech does not work that way. The physics is the same, the process nodes are the same, the certification standards and the buyers are largely the same. A semiconductor company in Bengaluru is measured by the same yardstick as one in Hsinchu or Eindhoven. For the first time, the diaspora’s hard-won expertise is directly applicable to what is being built here—And it arrives just as India’s deeptech sector reaches its own inflexion point.
Indians today occupy senior positions across some of the world’s leading technology companies, universities and laboratories. Diaspora investors have watched the deeptech cycle play out elsewhere in the world. Someone who has spent 30 years in the semiconductor industry in the Valley does not need persuading that a fab takes a decade. They understand the technology better than most limited partners will, which translates into help beyond the cheque—whether as technical diligence, a first international customer, or a senior R&D hire. Their capital is genuinely patient, which matters in a sector where money that needs an answer in five years is simply the wrong money.
The diaspora already sends capital home at record scale—over a hundred billion in remittances, the largest of any country, and a few billion channelled into GIFT City funds. But remittances are not risk capital in Indian intellectual property. The window for the diaspora to invest in the country’s deeptech is now.
India’s exit ecosystem is more vibrant than it has ever been, and anyone entering deeptech today is underwriting exits 10 to 15 years out, into a market capable of providing them. A decade from now, this will look like an obvious trade. Today, it still takes conviction, which is precisely why the returns are there to be had.
GIFT IFSC could serve as an important bridge to bring more diaspora capital into this opportunity. As of June 2025, the International Financial Services Centres Authority (Ifsca) reported 177 Fund Management Entities and 272 schemes, with $22.1 billion in commitments and $11.3 billion already invested. Importantly, around 85% of these investments were channelled into India. For global Indians who want to participate in India’s deeptech opportunity but may not want to navigate the Foreign Exchange Management Act, know-your-customer, taxation, reporting and repatriation requirements associated with multiple direct investments, professionally managed funds in GIFT IFSC can provide an increasingly relevant route.
Growth capital
Now, the need for growth capital. The TRL 4-7 valley of death is discussed constantly. There is a second valley, later, that we rarely name. Picture a company that has come through the first valley of death—the technology works, customers are real, and revenue has begun. And then it stalls, because it is now too large and too capital-hungry for early-stage venture but too early and too technically complex for private equity. Above roughly $20-$30 million a round, deeptech growth capital in India is essentially absent. This is exactly where hardware needs the most money: the move from prototype to production, tooling, plant, working capital, certification, and international sales motion.
Many of the new deeptech-focused funds being set up in India are welcome and are addressing the earlier problem, but almost all are mandated to be early-stage. They can follow up with smaller cheques, but cannot lead a $50 million round.
Viewed from another lens, growth capital is also an exit. In a sector defined by long gestation periods, a growth round that exits an early investor’s position provides liquidity years before an initial public offering (IPO). That is what makes the next early-stage fund raisable. Outside India, this is a fully developed market: global secondaries volume was $226 billion in 2025, with sponsors using continuation vehicles to hold on to their best assets rather than sell them. India’s equivalent is a fraction in comparison.
There are two ways to mobilize this growth capital. One is a standalone organization focused exclusively on growth. The other, which is the route we have taken at Accel, is for an early-stage firm to establish a separate pool of capital that can support a company through its growth stages, with the additional privilege that you keep backing an exceptional founder you met at seed right through to listing, rather than handing them off at the moment they most need continuity.
As a venture capitalist deeply embedded in the startup ecosystem, I’ve watched a remarkable cohort of Indian deeptech companies emerge over the past few years. These are companies that build or apply cutting-edge engineering, science, or process innovations. They are largely based on original R&D, involve deep localization of globally proven technologies or solve for non-trivial system integration—none of which was possible via off-the-shelf tech.
There is enough evidence to prove that the opportunity is real. India has solved for the beginning of the deeptech journey through grants and angel funding, and is starting to solve for the end through a public market willing to pay a premium for Indian IP. Blocks in the middle are also falling into place, but will not be complete without corporates, diaspora, and growth capital. If we solve this, India will not only produce deeptech companies but also compound them. I have rarely been more optimistic about what this country can build.
Prashanth Prakash is a TiE charter member and founding partner at Accel India.
This is the second part in the series. Next week: Pranav Pai on the ideal way to track innovation in India.
Read the previous part: The next startup revolution is already happening in rural India
