India’s deeptech funding gap persists despite ecosystem growth

India’s deeptech startups are growing in number and ambition, but follow-on funding remains elusive. At the Moneycontrol Startup Conclave last week, founders and investors agreed that while seed capital is easier to come by, scaling these companies—particularly those building hardware or indigenous technology—demands patient capital that most local funds can’t provide.

The conversation isn’t new. When we covered India’s proposed Japan-backed deeptech funding corridor last month, the pitch was clear: tap into Japan’s long-term investment pools to fill the gap. But the corridor is still just an idea, and in the meantime, deeptech startups are left navigating a funding environment that favors software and quick returns. Bengaluru, which accounted for a significant portion of India’s startup funding in the first nine months of 2026, has historically seen more investment flow into software-driven ventures. Deeptech, by contrast, requires years before commercialization, a timeline that clashes with the typical VC fund cycle.

Participants at the conclave noted that the availability of skilled professionals is improving, and competition from global players is increasing. This dynamic could push Indian startups to develop more advanced technology, but it also raises the stakes for follow-on funding. Without sufficient capital, even promising companies may struggle to retain talent or compete with better-funded rivals abroad. The space-tech sector, which we reported on earlier this month, reflects this trend: more startups are emerging, but investors remain cautious, despite the sector’s potential.

The problem isn’t a lack of interest. PIVOT 2026, the DeepTech Innovation and Venture Summit held in Kochi last month, drew strong attendance from founders, corporates, and government representatives. Figures like Ramanan Ramanathan have emphasized the importance of developing homegrown technology. However, policy support and early-stage enthusiasm haven’t yet led to the kind of funding deeptech startups need to scale. Seed rounds are being completed, but later-stage funding remains difficult to secure.

What’s next? The Japan corridor could be a solution, but progress is slow. In the meantime, deeptech startups may need to focus on generating revenue earlier, even if it means scaling back some long-term goals. Some might seek corporate partnerships or government grants to bridge the gap. Others may look overseas, particularly to markets where deeptech is already a proven category. Either way, the funding challenges aren’t going away soon—and the startups that survive will be those that adapt to a funding environment that still favors software-driven models.

Sources: moneycontrol.com