Interview by The Prime Today Magazine
Tushar Kansal is a distinguished entrepreneur, thought leader, and financial strategist with deep expertise in venture capital, private equity, and startup advisory. He is the Founder and CEO of Kansaltancy Ventures, a global advisory firm that has empowered hundreds of startups and growth-stage companies through strategic guidance and fundraising support. With an MBA in Finance from the University of Delhi and an Executive Program in Leadership & Strategy from Harvard Business School, Tushar combines academic excellence with hands-on industry experience. His work has earned him recognition across platforms such as TiE, IITs, IIMs, and global startup forums.
In this exclusive conversation with The Prime Today, Tushar shares his entrepreneurial journey, insights on India’s startup ecosystem, and advice for emerging founders.
Q1: What structural factors have enabled the growth of over 3,600 deep tech startups in India, and what still holds the ecosystem back from realizing its full potential?
It’s something I’ve thought about quite a bit, having worked closely with startups and investors across stages. I think the rise of deep tech startups in India—over 3,600 of them now—is not a random event. It’s the result of several foundational shifts that have happened over the past decade or so, many of which have quietly reshaped the environment in which technology ventures grow.
Firstly, the educational infrastructure in India has played a pivotal role. Prestigious institutions like the Indian Institutes of Technology (IITs) and the Indian Institute of Science (IISc) have been instrumental in producing a steady stream of highly skilled engineers and scientists. These institutions have not only focused on traditional engineering disciplines but have also ventured into advanced areas such as artificial intelligence, quantum computing, and biotechnology. This focus has nurtured a talent pool capable of driving deep tech innovations.
Government initiatives have also significantly contributed to this growth. The Startup India initiative, launched in 2016, has provided numerous benefits to startups, including tax exemptions, simplified compliance procedures, and support for intellectual property rights. As of October 31, 2024, over ₹21,000 crore has been mobilized through flagship schemes like the Fund of Funds for Startups (FFS), Startup India Seed Fund Scheme (SISFS), and Credit Guarantee Scheme for Startups (CGSS) . These initiatives have created a more favorable environment for startups to thrive.
In 2024, the government launched a $500 million fund dedicated to deep tech innovations, focusing on sectors like healthcare, agriculture, and renewable energy . This substantial financial commitment underscores the government’s recognition of deep tech as a critical area for future growth and its willingness to invest in its development.
The investment landscape has also evolved to support deep tech startups. In 2024, Indian tech startup funding increased by 23% to $7.4 billion, with deep tech startups raising $1.6 billion—a 78% boost from the previous year . This surge indicates a growing investor confidence in the potential of deep tech ventures.
However, despite these positive developments, the deep tech ecosystem in India faces several challenges that hinder its full potential. One significant issue is the funding bottleneck, particularly in the growth stages. While early-stage funding has seen an uptick, middle- and late-stage funding fell by as much as 66% and 92%, respectively, in 2023 . This gap forces many deep tech startups to seek funding overseas, which can lead to strategic shifts and even relocation, resulting in a loss of intellectual property and talent for the country.
Talent acquisition and retention present another challenge. Deep tech startups require highly specialized skills, and there is a notable shortage of professionals with expertise in areas like quantum computing, advanced materials, and biotechnology. This scarcity not only drives up hiring costs but also slows down the development and scaling of deep tech solutions.
The landscape is further complicated by regulatory complexities. Deep tech industries frequently work in fields like healthcare and defense that have strict regulations. Rapid innovation and commercialization may be hampered by the time and expense required to navigate these regulatory environments. For example, the defense technology industry still has trouble coordinating product development with legal requirements, even with programs like Innovations for Defence Excellence (iDEX), which provides grants of up to $1.2 million.
Other challenges include scalability and market readiness. From the research and development stage to market readiness, deep tech products frequently need a substantial investment of time and money. Investors have observed that a lot of Indian deep tech startups have trouble determining a product-market fit, which is essential for growing their businesses and making money.
Infrastructure limitations are another factor. The tech industry in cities like Bengaluru, which is frequently referred to as India’s Silicon Valley, has grown rapidly. But this expansion has outpaced the development of infrastructure, creating problems like rising property prices, water shortages, and traffic congestion. These problems can have an effect on startups’ operational effectiveness as well as the standard of living for their staff.
Even though India has made great progress in creating a thriving deep tech ecosystem, overcoming these obstacles is essential to achieving its full potential. Important actions include strengthening funding channels, making investments in specialized education and training, expediting regulatory procedures, and enhancing infrastructure. India can establish itself as a global leader in deep tech innovation if the government, business community, and academic institutions work together.
Q2: As India aims for 10,000 deep tech startups by 2030, what sectors—AI, space, semiconductors, biotech—are likely to lead this charge, and why?
India’s ambitious plan to launch 10,000 deep tech companies by 2030 demonstrates the country’s dedication to technological advancement..Artificial Intelligence (AI), space technology, semiconductors, and biotechnology are among the many industries that are expected to propel this expansion. Let us examine each of these industries to learn more about their potential and the elements that make them expected to lead India’s deep tech market.
Let’s start with Artificial Intelligence. This space is moving at an incredible pace globally, but India is now putting serious muscle behind it. The recently launched India AI Mission with a budget outlay of ₹10,371 crore—that’s roughly $1.25 billion—is a strong signal that the government is not just watching from the sidelines. The idea is to build indigenous large language models, compute infrastructure, and AI-focused datasets. We’re talking about creating sovereign AI capacity that reduces our dependence on global models. NASSCOM and other bodies have projected that AI could add between $500 billion to $1 trillion to India’s GDP by 2030. And it’s not just theoretical—AI applications are already reshaping everything from agriculture to fintech. Startups in healthcare are using AI to predict diseases like diabetes and cancer, and agritech companies are using computer vision to detect crop health. It’s becoming foundational, not optional. And when you couple that with the fact that we are producing around 3 million STEM graduates every year, it’s a recipe for an explosion of AI startups.
Now, space tech in India used to be just about ISRO for the longest time, but that’s changing dramatically. The government has opened up the sector to private players, and the Indian National Space Promotion and Authorization Center (IN-SPACe) has become a key enabler. Look at what’s happened since 2020—we’ve had the rise of startups like Skyroot Aerospace, Agnikul Cosmos, and Pixxel. These aren’t small players—they’re doing serious innovation. Pixxel, for example, is working on a constellation of hyperspectral imaging satellites and already launched its first commercial satellite backed by Google. That’s no small feat. The space economy in India is projected to reach $13 billion by 2025, and even though we saw a 55% dip in funding for space startups in 2024, that’s more of a temporary market correction than a long-term trend. The government has just announced a ₹10 billion rupee, or around $120 million, fund to support startups in the space sector. That’s going to be critical, especially because space is a capital-intensive domain and startups need both early R&D support and later-stage growth capital.
Semiconductors is another area where the ambition is sky high, and rightly so. This is a sector where we’ve historically been consumers, not producers. But now, with the India Semiconductor Mission (ISM), there’s a $10 billion incentive scheme in place to encourage fabs and design houses to set up shop here. India already accounts for 20% of the world’s semiconductor design talent—that’s around 125,000 engineers working across companies like Intel, Qualcomm, and Texas Instruments. The challenge has always been on the fabrication side. But we’re finally seeing movement there too. Companies like Micron have announced significant investments, and we’re now talking about setting up packaging and assembly units in Gujarat and elsewhere. If India plays its cards right, we won’t just be a design destination, we’ll be part of the manufacturing supply chain. Given the global geopolitics around chip independence—think U.S.-China tensions, Taiwan’s centrality—there’s a big opportunity for India to position itself as a neutral and reliable partner in the semiconductor space.
Biotech is perhaps the most underappreciated deep tech domain in India, but it shouldn’t be. India has the third-largest biotech ecosystem in Asia, and it’s growing at a CAGR of over 15%. We have over 5,300 biotech startups as of 2023, and this number is expected to go past 10,000 by 2025 itself—so that alone could push the deep tech numbers very close to the national 2030 target. The COVID-19 pandemic gave a massive boost to public awareness and private funding in this sector. We saw companies like Bharat Biotech and Serum Institute step up in a big way, and that momentum has carried forward. Beyond healthcare, biotech is making waves in agri-biotech, where companies are working on drought-resistant seeds, and in industrial biotech, with innovations in bioplastics and biofuels. The government has launched the National Biopharma Mission and is investing in biotech parks in states like Karnataka, Telangana, and Tamil Nadu. It’s a long play, but if India wants to be at the forefront of solving global health and food security challenges, biotech has to be in the mix.
So when we talk about the next wave of deep tech startups in India, it’s really going to be led by this quartet—AI, space, semiconductors, and biotech. What connects all four is that they require a mix of high technical capability, long gestation funding, and strong policy support. And India is slowly building an ecosystem that recognizes those needs. For instance, the National Deep Tech Startup Policy released in 2023 outlines frameworks for funding commercialization, IP protection, and creating testbeds for pilot runs—these are not glamorous things, but they’re critical enablers.
Now, is everything perfect? No. There are still huge gaps, especially in early-stage risk capital for hardware-heavy deep tech ventures. But the needle is moving. In 2023 alone, deep tech startups in India raised over $300 million in funding. That’s still small compared to software or SaaS, but it’s a signal. Global VCs and even sovereign wealth funds are beginning to take interest. Institutions like IITs, IISc, and newer accelerators like T-Hub and C-CAMP are becoming breeding grounds for the next set of IP-heavy companies. And what excites me is that a lot of these startups are not just copying Western models—they’re building for Indian problems, in Indian contexts, whether it’s low-cost MRI machines, affordable genomics, or reusable rockets.
Q3. While early-stage deep tech funding is relatively accessible, why is there a funding “valley of death” post-Series A, and how can this be bridged effectively?
That’s a very real and very serious problem in the deep tech startup ecosystem—not just in India, but globally. And it’s what we call the “valley of death” post-Series A. See, when a deep tech startup gets off the ground, the early excitement is often enough to attract angel investors, public grants, or pre-seed and seed-stage VCs who are drawn in by the novelty of the science or the ambition of the idea. India, in particular, has done fairly well on that front. Initiatives like the National Initiative for Developing and Harnessing Innovations (NIDHI), BIRAC’s Biotechnology Ignition Grant, and various university-linked incubators like those at IITs or IISc have given early-stage founders a solid starting point. And we’re seeing the fruits of that—in 2023 alone, India had more than 3,000 deep tech startups, and that number is expected to cross 10,000 by 2030 as per the government’s vision.
But the trouble really begins after Series A. That’s when the rubber meets the road. Because deep tech isn’t like SaaS or consumer tech where you can build a basic MVP in three months, ship fast, iterate, and start generating revenue. In deep tech, the MVP might take years. Think about sectors like space, semiconductors, biotech, or climate tech—these are domains where product development cycles can stretch into five, even seven years. The capital requirements are heavy. The regulatory landscape is often complex. And the addressable markets might still be in the process of maturing.
What ends up happening is this: an enthusiastic early investor might get you to Series A, but beyond that, the pool of VCs who are willing to write Series B or Series C cheques for a company that is still pre-revenue or hasn’t shown commercial traction yet—that pool is very shallow. That’s your valley of death. And it’s not just anecdotal. Global data from PitchBook and CB Insights consistently shows that Series B and Series C rounds for deep tech ventures take 2–3x longer to close than for software startups, and the dropout rate is significantly higher. According to a report by BCG and Hello Tomorrow, nearly 70% of deep tech startups globally fail to raise capital beyond Series A. That’s an astonishing number.
Part of the problem is structural. Most Indian VCs are still skewed towards capital-efficient models. They want revenue visibility within 18–24 months, and that’s just not how deep tech works. This funding mindset needs to evolve. The good news is that we’re seeing some green shoots. A few family offices and sovereign funds are beginning to see deep tech as a national interest play rather than just a financial one. The Semiconductor Mission, with $10 billion of committed incentives, and initiatives like the IndiaAI Mission are designed to de-risk some of these investments by providing parallel government support. But we still need more dedicated deep tech funds in India—vehicles that are comfortable with longer gestation periods, that have LPs who understand that returns will come, but they’ll come on a 7–10 year horizon, not three.
Another part of the solution is creating better bridges between academia, government, and private capital. In the U.S., DARPA plays that role beautifully—it funds early R&D, supports pilots, and sometimes even becomes the first customer. In India, we’ve started seeing CSIR, DRDO, and ISRO collaborate with startups, but it’s still fragmented. We need smoother handoffs. A deep tech startup emerging from IIT Delhi, for example, should not have to spend a year figuring out how to do a pilot with BHEL or BEL. There should be a pre-built mechanism to support that. That’s where initiatives like the National Deep Tech Startup Policy, released in 2023, can be a gamechanger—it outlines structured pathways for commercialization, tech validation, IP transfer, and access to testbeds.
I also think the culture around risk capital needs to change. In a typical VC pitch for a consumer startup, we talk about CAC, LTV, DAUs. But in deep tech, the most valuable asset is intellectual property. We need VCs who are able to do technical due diligence, not just market sizing. Take the example of Agnikul Cosmos—they built a semi-cryogenic rocket engine using 3D printing. Now, imagine trying to explain the TAM of that product using conventional metrics—it doesn’t work. You need people on the investing side who understand the technology roadmap and know how to underwrite scientific risk.
Corporate venture capital could also play a crucial role in bridging the Series A-B-C gap. In Japan, Europe, and increasingly the U.S., you see a lot of corporates backing deep tech as a way to future-proof their own businesses. Indian conglomerates like Tata, Reliance, and Aditya Birla have the balance sheet and the sectoral presence to play that role here. But they need to move beyond M&A and into early partnerships and strategic equity investments. For example, a climate tech startup working on carbon capture should ideally be working hand-in-hand with an energy major or cement company from the start, not waiting for commercial traction to prove itself.
One last piece—and I think this is important—is about building global linkages. A lot of Indian deep tech startups are solving problems that have global relevance, but their funding networks are still mostly domestic. Tapping into global science-focused funds, connecting with accelerators like Y Combinator, IndieBio, or Techstars Deep Tech, and forming cross-border academic collaborations can provide validation and co-investment opportunities that help bypass the local funding bottlenecks. The DPIIT’s Startup India Seed Fund is a great beginning, but we need to think bigger. Can India create a sovereign deep tech investment fund, perhaps in collaboration with private LPs and multilaterals? That would send a very strong signal to the market.
So to sum it up, the “valley of death” post-Series A exists because of a mismatch between the nature of deep tech businesses and the risk appetite of conventional capital. The bridge, therefore, has to be built with a combination of long-view capital, state-supported infrastructure, patient investors with technical depth, and policy frameworks that make it easier for deep tech companies to survive the lean years. If we don’t build this bridge, we risk losing some of our most promising scientific ventures right when they’re about to make the leap from lab to market. And that’s a cost India simply cannot afford—especially not now, when the whole world is looking to diversify its tech supply chains and India has a rare window to lead.
Q4. Why do traditional VCs often hesitate to invest in deep tech startups, and how can we reshape their risk perception and investment horizon?
Traditional VCs are often wired for speed and scale. They look for businesses that can show traction fast, iterate quickly, and scale predictably. Deep tech doesn’t quite fit that mould. It’s a different beast altogether.
Let’s take a step back. Deep tech startups—whether in AI, space, semiconductors, or biotech—typically involve long R&D cycles, heavy upfront capital, regulatory hurdles, and uncertain paths to commercialization. The timeline for product-market fit can stretch from 3 to 7 years, sometimes even more. That’s a tough sell for funds that operate on a 7–10 year lifecycle and are under pressure to return capital by year 5 or 6.
Also, the risk profile is fundamentally different. In SaaS or B2C models, you’re often betting on execution risk—will the team build and sell the product well? But in deep tech, you’re often dealing with technical risk—will this even work outside the lab? That kind of uncertainty makes many investors uncomfortable, especially if they don’t have domain expertise to evaluate the tech.
Now, how do we reshape this perception? First, we need more patient capital in the ecosystem—funds that are structured differently, with longer lifecycles and LPs who understand that deep tech success is a slow burn. Government-backed funds like SIDBI, BIRAC, and the new deep tech-focused programs announced under the National Deep Tech Startup Policy (2023) are already helping to de-risk early-stage bets. But we need more hybrid models—where VCs can co-invest with government or corporate players who understand the sector deeply.
Second, we need better translational infrastructure. A lot of deep tech ideas get stuck in research labs because there’s no bridge to commercialization. Institutions like IITs, IISc, and incubators like T-Hub, C-CAMP, and SINE at IIT Bombay are starting to act as these bridges—offering access to prototyping labs, testbeds, and industry mentorship. But we need more of that, especially outside the metro cities.
Third, exits. Let’s be honest—VCs are ultimately looking for liquidity. Deep tech exits are still rare in India, but that’s changing. Look at acquisitions in AI and space tech globally. Even Indian companies like ideaForge (drones), Tonbo Imaging (defense tech), and Sascan Meditech (biotech) are showing viable exit stories. Once a few of these startups get acquired or go public, it’ll shift the narrative from “too risky” to “high-risk, high-reward.”
Finally, we need to reframe what success looks like. A deep tech startup may not acquire 10 million users in 2 years. But if it can crack something fundamental—like affordable cancer diagnostics or reusable satellite launch vehicles—that’s massive value, even if it takes time. We need more investors who are willing to underwrite ambition, not just ARR.
So, it’s not about convincing all traditional VCs to back deep tech. It’s about evolving a parallel investment architecture—one that’s aligned with the timelines, risks, and rewards of building for the deep end of the tech pool. And India is slowly getting there.
Q5. With deep tech funding in India down by 77% in 2023, is this a temporary global correction, or does it reflect a deeper misalignment between capital and innovation?
The 77% drop in deep tech funding in India in 2023 sounds alarming on paper, and yes, it has sparked a lot of discussion. But to interpret this purely as a failure of innovation or investor confidence would be a misreading of the moment. What we’re really seeing is a mix of a cyclical global correction, some overdue recalibration, and also, yes, a structural misalignment between capital structures and the unique demands of deep tech innovation.
Let’s start with the macro view. Globally, venture funding in 2023 saw a sharp pullback across the board. According to Crunchbase and PitchBook data, VC investments worldwide fell by over 40% compared to 2022. This was a natural response to the post-COVID excesses, geopolitical uncertainty, inflationary pressure, and interest rate hikes by central banks. When capital becomes expensive, the first to feel the squeeze are long-gestation, high-risk sectors—like deep tech. This is not a reflection of lack of promise, but rather a risk-off sentiment that swept across all asset classes.
Now zooming into India—deep tech is still an emerging asset class. While we’ve seen over 3,000 deep tech startups come up over the past few years, most of them are still in early R&D or pre-revenue stages. These are not the kind of ventures that attract growth capital easily, especially when global capital pools are drying up. The decline in funding in 2023 was especially pronounced in capital-intensive verticals like space tech and semiconductors, which require long cycles of development and large upfront bets. But interestingly, we still saw activity in segments like AI, particularly generative AI, and in biotech, which saw strategic funding from corporates and government-led initiatives.
What this signals is a deeper, structural challenge: a misalignment between the type of capital we have in the Indian VC ecosystem and the kind of capital deep tech truly requires. Most funds in India are still structured with 7–10 year lifecycles, and their LPs are not incentivized to wait out a decade-long innovation curve that may or may not pay off. Deep tech, on the other hand, is inherently long-term—it’s about building IP, going from lab to market, navigating regulatory approvals, and often inventing whole new markets. That requires patient capital, technical evaluation capabilities, and milestone-based funding models—not just growth hacking and blitz-scaling.
To correct this, we need a new investment architecture. This includes blended finance models, where government or public funds absorb some of the early-stage risk, allowing private VCs to step in at a later stage. Countries like the US, Israel, and South Korea have done this well—using state funds to support frontier technologies and later crowding in private capital. India has taken a step in that direction with initiatives like the ₹1,000 crore Deep Tech Startup Fund announced in 2023 under the National Deep Tech Startup Policy, but implementation and scale will be key.
What also needs to evolve is our approach to exits. Deep tech companies in India still don’t have predictable exit pathways. IPOs are rare, and M&A activity is nascent. Global players do look at Indian IP, but the pipeline needs to mature. Without clear exit visibility, many VCs simply won’t allocate meaningful capital. Fixing this requires building stronger industry-academia linkages, pushing strategic collaborations between startups and large corporates, and encouraging global co-development models.
That said, I don’t believe the funding drop in 2023 is a permanent decline. If anything, it’s a healthy reset. It’s forcing everyone—startups, investors, policymakers—to get real about what it takes to build in deep tech. There’s still strong government backing, increasing interest from sovereign wealth funds, and even global VCs like Sequoia, Accel, and Lightspeed exploring deep tech-focused vehicles. The fundamentals of talent, demand, and national strategic interest haven’t changed. India still produces over 3 million STEM graduates a year, we have a growing domestic market hungry for indigenous innovation, and deep tech has become core to our national ambition—from semiconductor self-reliance to quantum computing.
So yes, the 77% drop reflects both a short-term funding winter and a deeper long-term misfit between capital expectations and innovation timelines. But if we can use this moment to build the right institutional mechanisms—patient capital, stronger incubators, public-private co-investment models—then the downturn may end up being the foundation for a far more resilient and mature deep tech ecosystem in India.
And remember, the journey to build real deep tech ecosystems—Silicon Valley, Israel’s startup nation, Taiwan’s chip ecosystem—all took decades. India is just getting started.
Q6. Are India’s current policy frameworks and incentive schemes—like the PLI scheme for semiconductors—sufficient to foster long-term deep tech innovation?
India’s efforts to promote deep tech innovation have been admirable. The draft National Deep Tech Startup Policy, the PLI scheme for semiconductors, and programs like iDEX and BIRAC demonstrate a sincere desire to go beyond token gestures. The planned infrastructure—₹76,000 crore in investments, academic spinouts, and cross-sector momentum—indicates a nation that aspires to develop vital technology rather than merely use it.
But that’s only half the story.
Despite these initiatives, the actual on-ground momentum remains patchy. Much of the current policy push is supply-side—focused on enabling manufacturing or R&D capacity—but without an equally strong demand-side pull. Deep tech startups don’t just need help building things; they need help selling them, deploying them, validating them. Public procurement could play a powerful role here, but it remains underutilized. Government as a first customer, especially in defense or health tech, could dramatically change the risk profile of these ventures.
Capital is another major bottleneck. VCs still hesitate due to the long timelines and uncertain exits, and while government schemes lower some costs, they don’t close the patient capital gap. India lacks a strong equivalent of the U.S. SBIR model—milestone-based grants, government-backed funds, or institutional buyers that de-risk innovation. Without that, founders either give up, move out, or end up trapped in a cycle of never-ending pilots.
There’s also the matter of talent. While India produces world-class engineers and researchers, too much of that talent migrates or is absorbed into IT services. Deep tech founders need not just academic grounding but also translational pathways—labs that push research into products, tech transfer offices that understand markets, and incentives that make staying in India the smarter bet.
Execution remains the elephant in the room. Startups trying to access schemes still face heavy paperwork, poor inter-agency coordination, and long timelines that don’t match startup urgency. It’s not enough to announce a policy—you need a system that moves at startup speed.
Most crucially, we haven’t yet built the “valley of death” bridge—from TRL 3 to TRL 7, from lab validation to pilot deployments. That’s where most deep tech startups fail—not due to lack of vision, but lack of support when it matters most.
If we want to move from isolated schemes to a true deep tech ecosystem, the focus now must be on building innovation clusters where academia, startups, corporates, and government are deeply intertwined. The next chapter requires not just manufacturing zones but translational hubs, not just funding announcements but bold public buyers, not just intent but execution.
We’ve made a good start. But to truly lead in deep tech, India must now act with the same risk appetite, agility, and long-term patience that deep tech itself demands.
Q7. What lessons can India learn from countries like Israel or the US in building a resilient deep tech funding pipeline supported by both public and private capital?
India doesn’t need to copy-paste the Israel or US model—but there’s a lot to learn from how they’ve structured their deep tech funding ecosystems.
Start with Israel. Often called the “Startup Nation,” Israel has over 9,000 startups in a country of just 9 million people—that’s one startup for every thousand people. Nearly 10% of its GDP is spent on R&D (public + private), one of the highest in the world. In deep tech alone—cybersecurity, defense tech, agritech—Israel has produced unicorns like Mobileye (acquired by Intel for $15B) and NSO Group. What enabled this? Early and sustained government involvement. The Yozma Program, launched in 1993, committed $100 million in public funds to co-invest with private VCs. The model was simple: the government would take on the downside risk, but if the startup succeeded, private VCs kept the upside. This pulled global capital into Israeli tech at a time when the country was still seen as a geopolitical risk.
Israel also institutionalized technology transfer. Every research university (like Technion and Hebrew University) has a dedicated tech transfer office. These offices file ~800 patents a year and generate over $2B annually in licensing revenue. Startups born out of this academic infrastructure get legal, IP, and business support right from day one.
The US plays at scale. Its SBIR and STTR programs together channel over $3.5 billion annually into deep tech SMEs, spread across 11 federal agencies, including NASA, NIH, DoD, and DOE. This isn’t just grant money—it’s staged, milestone-based capital that supports startups from ideation (Phase I) to commercialization (Phase III). In fact, over 70,000 patents and 700 public companies trace their origins to SBIR-funded projects—including household names like Qualcomm and Symantec.
And then there’s DARPA—the defense research arm that spends over $4 billion annually funding moonshots. GPS, the internet, voice assistants—all came out of DARPA bets. These aren’t safe bets—they’re often long shots with no guarantee of ROI. But when they succeed, they create entire industries. That’s the kind of risk capital the Indian ecosystem still lacks.
Crucially, both Israel and the US use government procurement as a funding tool. The US Department of Defense (with an annual budget of $842 billion) is one of the largest buyers of innovation in the world. Israel’s Ministry of Defense funds and buys from early-stage startups, giving them their first credible customers and cash flow.
Compare that to India: In 2023, deep tech startups in India raised just $560 million, down 77% from 2022. That’s less than 2% of total Indian startup funding. Most of it was early-stage, with almost no Series B+ rounds—pointing to a broken funding pipeline.
India’s policies are moving in the right direction. The PLI Scheme for semiconductors has a ₹76,000 crore outlay. The iDEX (Innovations for Defence Excellence) platform has approved over 150 startups in defense tech. The recently released National Deep Tech Startup Policy (Draft, 2023) also recognizes the unique challenges of commercializing science-based innovation.
But we’re still behind on execution. Our VCs often seek a 3–5 year return cycle, while deep tech takes 8–12 years to mature. We lack SBIR-style milestone grants. Public procurement of indigenous deep tech is limited to pilot programs. And while India produces 2 million STEM graduates annually, over 60% of our PhDs in science and tech still look for jobs overseas due to lack of research infrastructure and commercialization pathways.
To build resilience, India needs a full-stack approach:
Public-private co-investment funds that share risk and align incentives
Government as an anchor customer, not just a policymaker
Translational research hubs in top institutes to push IP into industry
Global tech corridors that connect Indian startups to supply chains in the US, EU, Japan, and Israel
And a cultural shift in how we value risk-taking, both in government and private capital
The lesson is clear: innovation thrives not just on talent or ambition—but on systems that back uncertain bets. Israel and the US built those systems. India has the intent—but we now need bold, sustained execution to match.
Q8. Given the longer gestation periods and uncertain go-to-market paths in deep tech, how can startups better align with real-world commercial demand from day one?
Deep tech founders often start with a technological breakthrough—but the harder part is figuring out who actually needs it, and who will pay for it. Unlike SaaS or consumer tech, where go-to-market playbooks are fairly repeatable, deep tech startups face a much fuzzier journey. You could have a world-class photonics or quantum sensing solution, but if there’s no clearly defined commercial use-case—or worse, if you’re years ahead of market readiness—your startup risks becoming a science project that never scales.
One way to de-risk this is to flip the model: start not with the tech, but with the pain point. In Israel, nearly 30% of deep tech startups emerge from dual-use defense R&D, with a clear initial customer: the government. In the US, NSF’s I-Corps program trains deep tech founders to spend the first six months just doing customer discovery—talking to over 100 potential users before building the product. India needs something similar: where the first grant or incubator doesn’t fund R&D, but funds market immersion.
The second lever is co-development with industry from day one. There are pockets of this in India already—TCS and Tata Steel have partnered with IITs to develop real-world industrial solutions. But most deep tech startups still struggle to get an enterprise pilot. Industry doesn’t want to deal with TRL-3 technology. Which is why translational hubs matter—places where academic IP is matured to at least TRL-6 or 7 with corporate input baked in. IISc’s CiSTUP and IIT Madras’ Research Park are early examples, but we need 50 more of these.
Another unlock is public procurement with flexible specs. Right now, government tenders in India are often so rigid they exclude innovation by default. But if you look at the US SBIR system, agencies put out problem statements—not pre-decided solutions—and invite startups to solve them. That creates a ready market on day one. Imagine if Indian Railways, DRDO, or NTPC could do the same for climate tech, mobility, or sensors.
It’s also about storytelling. Many deep tech startups struggle to communicate the value of what they’re building in business terms. If you’re solving a problem in advanced materials, don’t lead with the physics—lead with the cost reduction, the efficiency gain, the regulation it helps clients comply with. Investors and customers alike need to see the “why now” and “why this” clearly.
The deeper issue is that our startup ecosystem still treats deep tech like a side category. In 2023, only 3 out of 20 unicorns globally came from deep tech. In India, none. That doesn’t mean there’s no market—it means we’re not matching market need with frontier solutions effectively enough. And that needs to change—not just through policy or capital, but through better founder thinking from day zero.
Solve a real problem. Find your first customer early. And build tech with a purpose, not just elegance.
Q9. Is the Indian corporate sector ready to become early adopters of indigenous deep tech solutions, or does the market still prefer imported innovation?
That’s a loaded question—and one that cuts to the heart of where deep tech meets India’s industrial culture. On paper, India has no shortage of large corporates with the balance sheets, distribution networks, and strategic interest to back and adopt indigenous deep tech. But the reality is far more nuanced. While there are a few success stories and promising partnerships, we’re still seeing a strong bias—sometimes conscious, sometimes structural—toward imported innovation, especially when it comes to mission-critical technologies.
Let’s start with what we’re seeing on the ground. Indian deep tech startups in areas like EV batteries, drone tech, industrial automation, or agritech are building solid products—often at a fraction of the global cost. Startups like ideaForge, which built India’s first indigenously developed UAVs, have found adoption in government defense procurement. In fact, ideaForge’s IPO in 2023, which was oversubscribed by over 100 times, was seen as a sign of investor appetite. But even then, it took more than a decade for them to reach that level of recognition and traction. Why? Because corporate India, with a few exceptions, is still hesitant to bet early on homegrown deep tech.
One reason is historical. For decades, Indian firms—especially in manufacturing, automotive, and energy—have relied on tech transfers, JVs, or imports from Europe, Japan, or the US. That muscle memory is hard to break. Imported tech comes with perceived reliability, warranty, service models, and above all, “global validation.” For a CTO at a legacy firm, choosing a German industrial sensor over a startup from Pune often feels safer—not because the latter isn’t good, but because the risk of failure feels higher without an international badge.
But there’s also the issue of incentives. Most Indian corporates don’t have structured innovation pipelines or internal mandates to work with startups. Very few have dedicated venture arms or budgets allocated to experimental tech adoption. In the US, over 75% of Fortune 100 companies have active CVC arms. In India, that number is closer to 10%. So even if a deep tech startup comes with a compelling solution, there’s often no internal champion or process to pilot, much less adopt it at scale.
That said, things are beginning to shift. Sectors like renewables, automotive (especially EVs), and telecom are now facing pressure to localize innovation. PLI schemes are incentivizing local production, and by extension, local innovation. For instance, Ola Electric has been investing in battery tech R&D in-house, and Reliance is betting big on energy storage, green hydrogen, and materials science through partnerships and acquisitions. But these are still the exceptions, not the norm.
What could really tip the scales is a more structured framework for corporate-startup collaboration. Imagine if India’s largest companies had dedicated ‘deep tech sandbox’ programs where Indian startups could pilot under real industrial conditions. Or if public sector undertakings like BHEL, NTPC, or HAL had mandates to source 10% of their tech stack from domestic startups. That would radically change the optics and risk calculations.
We also need global validation to flow the other way. When an Indian deep tech startup gets adopted in the Middle East or Southeast Asia before it sees traction at home, it should be a moment of reflection. If global peers are willing to bet on Indian IP, why aren’t we?
To be fair, some of this is changing generationally. As leadership at Indian conglomerates evolves, the appetite for indigenous innovation is rising. But for now, we’re still in the early innings. India Inc. is not yet structurally wired to be an early adopter of domestic deep tech, though it should be—and hopefully will be—soon. Because if Indian corporates don’t believe in Indian deep tech, it becomes very hard for global markets to take it seriously either.
Q10. Should India focus on building a few high-quality deep tech startups with strong IP and global scalability—or is scale across verticals more important at this stage of the ecosystem?
That’s a classic ecosystem dilemma: depth or breadth. And for India’s deep tech journey, the answer might lie in a nuanced middle path—but with a clear tilt toward quality over quantity, at least in the current phase.
Let’s look at the why. Deep tech isn’t a numbers game. Unlike consumer tech, where 100 food delivery clones can compete on speed, UI, or pricing, deep tech is IP-intensive, capital-heavy, and often winner-takes-most. Whether it’s semiconductors, quantum computing, clean hydrogen, or advanced materials, the global market tends to consolidate around a few players with defensible technology and deep moats. And those moats don’t come from simply “being in the space”—they come from real breakthroughs, protected IP, validated performance, and the ability to scale globally.
This is where India’s strategic focus matters. We don’t need 50 mediocre drone companies—we need 3 globally competitive ones. We don’t need 200 biotech platforms—we need 5 that can go toe-to-toe with Amgen or Moderna. It’s not about shrinking ambition—it’s about choosing focus areas where India has the scientific base, talent depth, and geopolitical alignment to lead the world, not just play catch-up.
Take Israel as a benchmark. Despite having only ~9 million people, it has produced globally respected deep tech companies in cybersecurity, defense tech, and medical devices—because it concentrated resources, talent, and state support in specific verticals. India has more people in a single tier-2 city than Israel’s entire population—but our deep tech efforts are still too scattered.
Having said that, we shouldn’t overcorrect by backing just a handful of players in one or two sectors either. Some degree of vertical scale is essential to discover where our natural advantages lie. For instance, we may realize that India’s real deep tech edge emerges in battery chemistry (thanks to mining access and EV market size), or in climate tech (due to agrarian needs and solar scale). But this discovery process requires experimentation across sectors—just not at the cost of depth.
The risk with “scale across verticals” too early is that we end up with a long tail of startups, none of which cross the threshold of global competitiveness. This is already visible in some sectors where every incubator is pushing out “AI + X” startups without sufficient technical depth or long-term R&D thinking. The outcome? Investor fatigue, startup mortality, and global irrelevance.
What’s needed now is a sharp filtering mechanism: identify 10–15 high-potential startups across critical verticals (space, semiconductors, quantum, biotech, battery tech), give them massive support—capital, labs, state procurement, international exposure—and help them become global category leaders. This creates a signaling effect. Once global capital and markets see that Indian deep tech can build world-class products, it becomes easier for the second and third wave to follow.
So in short at this stage, quality trumps quantity. Let’s build flagbearers first. Let’s prove that India can produce not just startups, but global tech companies rooted in Indian IP. Once that credibility is built, scaling across verticals will become both easier and more meaningful.
Connect with Tushar Kansal
Tushar welcomes collaborations, partnerships, and conversations with fellow entrepreneurs and investors. He can be reached at tk@kansaltancy.com or via LinkedIn.