The deep tech sector in India is experiencing remarkable growth, with startups raising substantial funds and the government providing significant support. However, this rapid expansion presents a unique challenge for venture capitalists who are more accustomed to evaluating traditional tech businesses.
In 2026 alone, around 200 deep tech startups have raised nearly $2.3 billion, marking a 42% increase in funding compared to the previous year. This surge indicates that some startups are transitioning from experimental phases to viable enterprises. The government’s ₹1 lakh crore Research, Development and Innovation (RDI) scheme further bolsters this sector, focusing on areas like quantum computing, robotics, and biotechnology.
Mid-tier VCs shift focus to deep tech
Mid-tier venture capital firms are increasingly turning their attention to deep tech startups in India. Firms like Antler and Bertelsmann India Investments are evaluating more deep tech startups monthly, with a particular interest in climate tech, defense tech, and semiconductors. This shift is driven by the growing number of deep tech deals, with $574 million raised across 61 deals in 2026, up from $679 million across 94 deals in 2025.
To effectively evaluate these complex startups, VC firms are building networks of internal experts and external advisers. For instance, Antler, Kae Capital, and Bessemer Venture Partners are incorporating scientists, engineers, and domain specialists into their investment processes. This trend highlights the importance of technical due diligence alongside financial due diligence in the deep tech sector.
The unique challenges of deep tech investments
Deep tech startups present unique challenges for investors. Unlike traditional tech businesses, deep tech startups often require years of research and development before generating meaningful revenues. For example, a semiconductor startup may spend years designing and testing a chip, while a biotech startup could have excellent science but no commercial product for years. Investors in these sectors must evaluate the technology itself, rather than relying solely on financial spreadsheets.
Consider the space-tech startups Pixxel and Skyroot, which have raised $195 million and $160 million respectively. Investors in these startups are betting on the success of rocket engines, satellites, and imaging technology, markets that are still evolving. This requires a deep understanding of the underlying technology and its potential applications.
Y Combinator’s latest deep tech innovations
Y Combinator’s latest Demo Day showcased several innovative deep tech startups, reflecting a broader trend in venture capital towards sustainable solutions. Among the standout startups was Atomarine, which is developing nuclear-powered data centers that float at sea. This innovative approach aims to address compute shortages while avoiding local opposition to traditional data center constructions.
Another notable startup is Dipole Labs, which is tackling the inefficiencies of high-speed optical networking hardware used in AI data centers. Their technology allows for data to be transmitted without conversion from light to electricity, significantly reducing power consumption and heat generation. This innovation is particularly relevant as the demand for GPUs continues to rise, making energy efficiency a critical factor for data centers.
Isengard Industries is making waves with its locally producible, jet-powered drones designed for defense applications. Founded by a former Australian Army officer, this startup aims to provide affordable alternatives to conventional military drones. With a revenue of $10 million already, Isengard is attracting substantial VC interest, highlighting the potential for disruptive innovation in defense technology.
The interest in these startups reflects a broader trend in venture capital towards deep tech investments. As highlighted by Career Ahead’s analysis, VCs are increasingly looking for companies that not only promise high returns but also address pressing global challenges like energy efficiency and automation. This shift indicates a potential revaluation of what constitutes a successful startup in the coming years.
