India OKs $1.1B Fund to Ramp Up Deep-Tech Startups

India approves $1.1B state-backed venture capital program to boost deep tech

India has approved a $1.1 billion (₹100 billion) state-backed fund-of-funds to channel government capital into startups through private investors. The program targets high-risk, high-reward areas such as artificial intelligence, advanced manufacturing and other deep-tech sectors.

Program background and structure

First announced in the finance minister's January 2025 budget speech, the fund won cabinet approval more than a year later. The new vehicle follows a previous 2016 iteration that also committed ₹100 billion. That earlier program supported 145 private funds, which in turn invested over ₹255 billion (about $2.8 billion) in more than 1,370 startups, according to government figures.

The current program is structured as a fund of funds, a common model where the government backs private investment firms rather than directly investing in startups. Officials say this edition will be more targeted than the 2016 effort, with a sharper focus on:

• Deep-tech areas such as AI, semiconductors and advanced materials
• Advanced manufacturing and capital-intensive sectors
• Early-stage founders and smaller, domestic venture capital firms
• Geographic expansion of investment beyond major metropolitan hubs

Why India is doubling down on deep tech

Deep-tech startups typically require longer development timelines and larger capital commitments. By directing capital through private fund managers, the government aims to absorb part of the early-stage risk and encourage follow-on private investment. Strengthening local VC capacity is also a stated goal, particularly to support smaller funds that can back regional founders.

"Extensive consultations have taken place with all stakeholders," IT minister Ashwini Vaishnaw said, stressing flexibility in the program's deployment.

Startup growth and regulatory changes

At the announcement, Vaishnaw highlighted rapid startup growth: official slides showed startups rising from fewer than 500 in 2016 to more than 200,000 today, with over 49,000 registrations in 2025 alone—the highest annual total on record.

The cabinet approval follows regulatory changes designed to ease pressure on deep-tech firms. New rules extended the period a company can be classified as a startup to 20 years and raised the revenue threshold for startup-specific tax, grant and regulatory benefits from ₹1 billion to ₹3 billion (about $33 million). These changes aim to give deep-tech firms longer runway and greater access to incentives.

Context: investment climate and upcoming events

The approval comes ahead of the India AI Impact Summit, a government-backed event that will host global AI players including OpenAI, Anthropic, Google, Meta, Microsoft and Nvidia, alongside major Indian corporates such as Reliance Industries and the Tata Group. With more than a billion online users, India is an attractive market for global tech firms expanding their user base.

However, private capital has tightened. India's startup ecosystem raised $10.5 billion in 2025, down more than 17% year-on-year, while the number of funding rounds dropped nearly 39% to 1,518, according to Tracxn. The new fund-of-funds aims to help bridge this gap by mobilizing government capital through private investors to keep funding flowing into critical deep-tech and manufacturing ventures.

Implications for startups and investors

• Startups in AI, semiconductors, advanced manufacturing and other deep-tech fields may gain better access to larger pools of committed capital.
• Smaller, regional funds could attract more commitments, increasing investment outside major cities.
• Longer startup status and higher revenue thresholds provide deep-tech firms extended runway and improved access to policy benefits.

These measures, combined with the state-backed fund, form part of India's broader strategy to build domestic tech capability and attract global investment—while also supporting founders navigating a tougher private capital environment.

About this report

Reporting by Jagmeet Singh, covering startups and tech policy from India. Contact: [email protected].

Related topics: gaming news, AI policy, venture capital, deep tech investments.