India’s venture story is undergoing a change in emphasis. For much of the last decade, capital flowed towards consumer internet and software platforms, where growth was quick and capital requirements were modest. Attention is now moving to companies built on proprietary science and engineering, and two areas in particular have come into focus: deep tech startups in India and the defence technology companies emerging alongside them. What is more consequential than any single funding round is the set of conditions that has formed around these sectors, from public policy to manufacturing volumes to export demand.
A deeper base of founders and funding
According to Tracxn, India is home to more than 8,800 deep tech startups in India, of which 1,821 have raised funding and seven have reached unicorn status. The proportion is instructive: a meaningful base of companies has already crossed the threshold from laboratory concept to institutional capital.
Nasscom’s Indian Tech Start-up Report 2025 places total tech startup funding at USD 9.1 billion for 2025, an increase of 23 percent, with USD 2.3 billion directed to deep tech. Investors are evidently prepared to underwrite intellectual property and long development cycles alongside more familiar software models.
The appeal is practical. Ventures built on patents, specialised research and difficult-to-replicate engineering acquire defensible positions once a product reaches the market, and the entry barriers that result can support durable businesses and returns over a longer horizon.
Policy is building a floor of patient capital
The Union Cabinet approved the Research Development and Innovation Scheme with a corpus of INR 1 lakh crore, providing long-term financing at low or nil interest rates to private sector research and making provision for a Deep-Tech Fund of Funds. For companies that need years rather than quarters to reach commercial scale, this establishes a supportive financing layer beneath the venture market.
Defence innovation has a dedicated channel of its own. The iDEX scheme was approved with an outlay of INR 498.78 crore for 2021-22 to 2025-26, and the ADITI scheme with INR 750 crore for 2023-24 to 2025-26, both intended to bring startups into the development of technologies for the armed forces.
Defence manufacturing is broadening its base
India’s annual defence production reached a record INR 1.78 lakh crore in FY 2025-26, a rise of 15.6 percent over the previous year and 110 percent since FY 2020-21. Output of this scale generates steady demand for components, software, sensors and subsystems.
The private sector contributed about 24 percent of that production, roughly INR 42,000 crore, up from 22 percent a year earlier. A growing private share leaves more room for defence startups in India to participate as suppliers, technology partners and system builders.
The opportunity is broad. Modern defence platforms depend on electronics, drones, communication systems, advanced materials and software, and much of this work sits with specialised smaller firms. A startup that develops a reliable component or subsystem can become part of a long-running supply chain, where demand tends to recur rather than arrive as a one-off.
Exports extend the addressable market
Defence exports reached an all-time high of INR 38,424 crore in FY 2025-26, up 62.66 percent from INR 23,622 crore in the previous year, and Indian equipment now reaches more than 80 countries.
Private companies accounted for INR 17,353 crore of that total. For early-stage companies, global demand offers a larger addressable market than domestic requirements alone, which matters when investors weigh long-term returns.
Where the two sectors converge
Many modern defence capabilities rest on deep technologies. AI-based surveillance, autonomous drones, secure communications, advanced sensors and space-based systems sit at the intersection of the two sectors, which means a single technology platform can often serve defence, aerospace and commercial customers.
This dual-use character gives investors more than one route to revenue and reduces dependence on a single customer segment. Founders gain as well, since research undertaken for one application can carry across several markets, and funds with a long-term view have begun to study the two areas together.
The road ahead
The factors behind this interest are visible in the data. Funding is rising, policy has established a floor, production capacity is expanding and exports are opening larger markets. Technical depth and long-term demand, once treated as obstacles, are increasingly read as strengths, and that is why deep tech startups in India now receive sustained attention from investors.
The same reasoning applies to defence startups in India, which benefit from government backing, wider private participation and global demand. Companies in both areas need time to test, certify and scale their products, and capital that remains invested for the full journey is best placed to support them. The coming years are likely to place these sectors at the centre of India’s innovation and investment story.