India is witnessing a surge in deeptech investments, with strategic capital mobilization playing a pivotal role in nurturing startups. This growth is underscored by the opening of public markets for exits and the introduction of new funds that allow for innovative investments.
The deeptech sector in India is experiencing a transformation from a niche interest to a focal point of national attention. This shift is driven by a projected increase in domestic manufacturing, expected to reach $1.3 trillion by fiscal year 2030, growing at an annual rate of 18%. The country's share of global goods trade is anticipated to rise to 3% by the same year.
India's strategic positioning is further enhanced by a series of trade agreements with 38 countries, including the United Arab Emirates, Australia, and the European Union. These agreements are complemented by a competitive export market, bolstered by the rupee's depreciation.
Significant capital flows have been initiated, notably through the ₹1 trillion Research, Development and Innovation Fund (RDIF), launched last November. This fund supports projects at technology readiness level (TRL) 4 and above, marking a critical phase of technological maturity. The RDIF's initial cohort includes over 20 projects with costs exceeding ₹4,700 crore, spanning areas such as quantum computing, robotics, and biotechnology.
The Startup India Fund of Funds 2.0 has committed ₹10,000 crore to deeptech and innovative manufacturing, requiring participating funds to invest double the government's contribution. Meanwhile, the India Semiconductor Mission and the National Quantum Mission have seen substantial financial commitments, indicating a robust capital stack for deeptech enterprises.
Public market valuations reflect the high earnings multiples of India's listed defense and aerospace manufacturers, highlighting the value of Indian intellectual property. However, sustaining this momentum necessitates tapping into underutilized capital sources, including corporate, diaspora, and growth capital.
Corporate involvement is crucial, particularly in bridging the funding gap from TRL 4 to 7, often referred to as the 'valley of death'. The RDIF addresses this with low-cost loans covering up to half of a project's assessed cost, requiring the remainder to be funded by promoters or commercial investors. This setup amplifies equity rather than replacing it.
Institutional capital for deeptech has expanded, with funding growing by 37% in 2025 to $2.3 billion. However, the demand for capital still outpaces supply, necessitating the mobilization of corporate and global capability centers (GCCs). These centers, once back offices, now engage in genuine research and development, offering strategic investment opportunities.
Despite having over 2,000 GCCs and large corporates with strong balance sheets, India has yet to fully convert this potential into startup capital. In contrast, countries like Japan have seen significant corporate investments in sectors like advanced chipmaking, driven by strategic interests.
The Indian diaspora represents another untapped resource, offering 'intelligent capital' that extends beyond mere financial investment. Deeptech's global standards make it an ideal sector for diaspora involvement, as expertise gained abroad is directly applicable in India. This is particularly relevant as India's deeptech sector reaches a critical juncture.
Indians hold senior positions in leading global technology companies, providing valuable insights into the deeptech cycle. Diaspora investors, familiar with the industry's long timelines, offer patient capital that supports the sector's unique demands. While remittances from the diaspora are substantial, they do not equate to risk capital for Indian intellectual property.
India's exit ecosystem is more dynamic than ever, with deeptech investments today paving the way for exits 10 to 15 years in the future. As the sector matures, these investments are expected to yield significant returns, reinforcing the country's position in the global deeptech landscape.
