Scaling Challenges of Deep-Tech Startups in India: A Real-World Crisis, ETCIO
In 2025, Indian Union Commerce and Industry Minister Piyush Goyal sparked a heated debate in the startup ecosystem with his remarks at Startup Mahakumbh 2025, criticizing the focus of many domestic startups on consumer services like food and grocery delivery instead of deep-technology innovation. Goyal questioned whether India’s startups were content with building businesses that primarily create gig jobs, asking rhetorically: “Are we going to be happy being delivery boys and girls?” rather than pursuing transformative technologies such as semiconductors, artificial intelligence, machine learning, robotics, and next-generation manufacturing. The minister’s comments contrasted Indian startups with counterparts in China, where he said deep-tech ventures were driving strategic advancement. He also highlighted what he viewed as a worrying lack of deep-tech companies, citing government figures indicating only around 1,000 startups in deep-technology domains. This is a situation he described as “disturbing.”
Although India’s startup ecosystem has earned global recognition over the past decade, producing unicorns across fintech, e-commerce, SaaS, and consumer technology; however, beneath this success lies a quieter, more complex segment of innovation, which is that of deep-tech startups. These new-age ventures operate at the intersection of advanced engineering, science, and research, and are building solutions that are rooted in semiconductor design, artificial intelligence, robotics, quantum computing, biotechnology, and advanced materials.
Goyal’s remarks drew swift reactions from the startup community. Founders and industry leaders defended consumer-oriented ventures, pointing to job creation, revenue generation, and economic contributions. Some also argued that systemic support, patient capital, and clearer demand signals are essential for deep-tech growth. He later had to acknowledge that his statements were “not necessarily accurate.”
“There is sizable impact of deep tech startups in the Indian startup ecosystem but the scale is limited. Also, it varies across the sectors. For example, the impact as well as the benefits are huge in the manufacturing sector. Here, collaboration is key and basic education will need to be rewired in order to reap the full benefits,” says Dr. Sudin Baraokar, AI & DeepTech Transformation Advisor.
Challenges facing deep-tech startups in India
Deep-tech startups in India face structural challenges that are far more complex than those encountered by consumer-internet ventures. The ecosystem remains unevenly prepared to support long-gestation innovation.
According to Vijay Sethi, tech veteran and former CIO at Hero Motocorp: Deep-tech remains the final frontier. We have successfully mastered the App Economy, but the Atom Economy, that is, semiconductors, quantum, and biotech, presents a different set of challenges. Let me share three key challenges we must overcome: Talent, Infrastructure, and Capital. There is a common myth that India has a talent shortage. I always think it is not talent shortage but a specialization and incentive gap. Our education system has spent decades churning out fantastic Software / Application Engineers who develop code using existing tools. Deep-tech requires First-Principles Scientists who build the tools themselves. This requires a mastery of physics, chemistry, and advanced mathematics that isn’t yet deep in the curricula of most institutes. In a world of instant gratification, even in many areas of startups developers can see results of their efforts in months if not weeks. In Deep-tech, one might have to wait for three or four years for a single successful lab test. Keeping high-tier talent motivated through these long cycles in a culture of few-minute deliveries is a major cultural hurdle. At the same time with so many global organizations and GCCs being set up in India offering much higher salaries, a significant part of our top talent pool gets attracted there.Access to risk-friendly capital
One of the most pressing challenges for deep-tech startups in India is the lack of capital. Unlike consumer startups that can demonstrate traction within a period of months, deep-tech ventures may take years to move from lab validation to commercial viability. This timeline conflicts with traditional capital models that seek faster returns. While early-stage grants and seed funding do exist, there is a significant funding gap at the Series A and growth stages, where startups require large investments to scale manufacturing, research, or pilots. Several investors adopt a cautious approach due to uncertain timelines, technical risk, as well as low acquisition opportunities.
Many Indian founders building in deep-tech domains must balance cutting-edge research with survival. They are often bootstrapping or relying on fragmented grants while competing globally against well-funded peers in the US, Europe, and China. Commercialization remains difficult, as domestic markets for advanced technologies are still maturing, and enterprise or government adoption cycles are slow.
“If the gestation period of a deep tech startup to create a Minimum Viable Product (MVP) is more than 5 years, then funding is difficult. In fact, some of the deeptech activity is going to be quite futuristic. However, I do feel that supply will create its own demand, particularly for something that is not outrightly needed today. For example, in the domain of fusion energy, new materials for battery storage, brain stimulation devices that can work against depression, extracting carbon from a molecule such as CO2 and converting it into carbonates for cement manufacturing, etc.” says Venkat Iyer, Global CIO, Wockhardt.
While recent initiatives around AI research, semiconductor manufacturing, space technology, as well as clean energy signal positive momentum, the reality on the ground suggests that deep-tech entrepreneurship in India is still operating against structural challenges. Understanding such challenges is absolutely essential to support founders, design policies, institutional frameworks and funding mechanisms to turn scientific potential into scalable competitive business.
“A deep-tech startup in Silicon Valley often commands a valuation 5 to 10 times higher than an identical one in India. One of the reasons I see is that a lot of investors in the USA value Intellectual Property and long-term impact while a majority of Indian investors still look for immediate revenue and domestic market fit. This valuation gap forces our founders to register companies outside India,” adds Sethi.
Long R&D cycles and lack of commercialization deter potential investors
“While global peers like the US or Israel spend 2-4% of GDP on R&D, India is still catching up. Deep-tech requires cleanrooms, cryogenics, and high-end fabrication and research facilities that are either not available or prohibitively expensive for a seed-stage founder. Brilliant work is happening in our IITs, IISc and many other institutes but it often stays as a paper rather than a product as we lack the Commercialization Bridge that allows the professor to seamlessly spin off a company,” says Sethi.
Deep-tech innovation requires experimentation as well as sustained research. Moreover, startups have to contend with testing, prototyping, and certification cycles. In India, translating research into viable products is complicated also by weak academia-industry collaboration. Universities as well as research institutions operate in silos, with few mechanisms to transfer technology efficiently. As a result, startups struggle to bridge the gap between academic innovation and market-accepting solutions, slowing down innovation and increasing costs.
Deep tech R&D is time-consuming and capital-intensive, creating challenges between laboratory development and market viability. Moreover, talent retention is a challenge. While India produces engineering talent, retaining such top researchers in startups as opposed to multinational corporations remains challenging.
Domestic market readiness not yet ready for adoption
“Is there any customer demand for deep tech in India?” asks Sankarson Banerjee, tech expert, independent director and board member at several of India’s startups.
It is true. Many deep-tech solutions target industrial, enterprise, or government customers. However, domestic adoption of advanced technologies can be slow due to costs, procurements, and risk aversion. Startups face extended sales cycles as well as low pilot opportunities, thus, making it difficult to generate revenue early on. As a result, many deep-tech startups are forced to look globally for customers.
“Deep-tech startups in India face three structural challenges. First, MNCs are increasingly offering low-cost or bundled variants of advanced technologies—as we’ve seen with LLMs. Second, deep tech demands long gestation periods, testing the patience of entrepreneurs, teams, and investors alike. Third, India needs a deep, institutionalised licensing and commercialisation bridges between academia and industry that exist in the US—such as the Stanford–Silicon Valley or Columbia–industry ecosystem. Addressing these gaps is critical if India wants to build globally competitive deep-tech champions,” says Adhil Shetty, CEO, BankBazar.com
Deep-tech startups at a technological juncture
“We are entering a defining decade where deep tech will determine how fast and how far the country moves toward a Viksit Bharat. AI, advanced analytics, cloud, and intelligent automation are no longer enablers, they are the core infrastructure of India’s $5-trillion innovation economy. Across India’s startup ecosystem, deep-tech founders are tackling the hardest last-mile problems in healthcare, financial inclusion, supply chains, climate resilience, and public services by turning data into decisions at scale. These founders are going far beyond shipping new tools or apps. They are embedding intelligence into how India diagnoses illness, moves goods, manages risk, and delivers services at scale — quietly rewiring how the economy actually works. What will separate tomorrow’s breakout deep-tech companies from the rest is their ability to bring together real domain understanding, strong data foundations, and thoughtful AI to create outcomes that businesses and communities can see and measure. The message to the ecosystem is simple: stop thinking small, build for real-world scale, and work closely with large enterprises to take proven innovation from thousands of users to millions. If India is to realize its 2047 ambition, it will be because its deep-tech startups chose to solve the hardest problems with the most powerful tools, and did so with speed, scale, and purpose,” says Shashank Dubey, Chief Revenue Officer & Co-founder, Tredence.
Deep-tech startups hold great promise for India’s tech future, but realizing this potential requires systemic change. A few steps in the right direction can go a long way such as, addressing capital gaps, improving regulatory clarity, strengthening academia-industry collaboration, and building specialized talent. India stands at a critical juncture. With adequate ecosystem support and the right structural reforms, deep-tech startups can move to the mainstream and drive resilience, innovation, and global leadership in the days to come.
