India Supercharges Deep Tech: $1.1 Billion Fund Aims to Ignite Startup Revolution

India has officially greenlit a $1.1 billion (₹100 billion) state-backed venture capital program, signaling a major push to bolster its deep tech startup ecosystem. Approved by the cabinet this week, the fund aims to inject much-needed capital into areas like artificial intelligence, advanced manufacturing, and other emerging technologies that often require significant upfront investment and longer development timelines. This move follows a similar initiative launched in 2016, which channeled ₹100 billion into 145 private funds, resulting in over ₹255 billion (approximately $2.8 billion) invested across more than 1,370 startups.

Structured as a "fund of funds," the program will operate by allocating capital to private venture capital firms, who will then invest directly in startups. This approach leverages the expertise of private investors while ensuring government support for strategically important sectors. Unlike its predecessor, this iteration will adopt a more targeted approach, specifically focusing on deep tech and manufacturing ventures. The initiative also prioritizes backing early-stage founders, expanding investment beyond major metropolitan areas, and strengthening smaller, domestic venture capital firms – all crucial elements for fostering a truly inclusive and robust startup ecosystem.

The announcement, made by IT Minister Ashwini Vaishnaw, coincided with data highlighting the exponential growth of India's startup landscape. From fewer than 500 startups in 2016, the number has surged to over 200,000 today, with more than 49,000 new startups registered in 2025 alone – a record high. This impressive growth underscores India's potential as a global innovation hub.

The approval of the venture capital fund comes on the heels of recent regulatory changes designed to ease the burden on deep tech companies. The Indian government has extended the period for which these firms are classified as startups to 20 years and increased the revenue threshold for startup-specific benefits to ₹3 billion (approximately $33 million), up from ₹1 billion. These policy adjustments create a more favorable environment for startups to thrive and attract investment.

This strategic investment arrives just ahead of the government-backed India AI Impact Summit, a major event attracting participation from global AI giants like OpenAI, Anthropic, Google, Meta, Microsoft, and Nvidia, alongside prominent Indian corporations such as Reliance Industries and Tata Group. As the world's most populous nation with a burgeoning internet user base exceeding one billion, India is increasingly becoming a key battleground for tech companies seeking to expand their reach and influence. The summit and the newly approved fund send a clear message: India is serious about becoming a global leader in AI and other cutting-edge technologies.

The timing of this government initiative is particularly significant given the recent slowdown in private funding. In 2025, India's startup ecosystem raised $10.5 billion, a decrease of just over 17% compared to the previous year, as investors became more discerning and reduced the number of deals. Data from Tracxn reveals that the number of funding rounds plummeted by nearly 39% to 1,518 transactions. In this environment, the government's commitment to providing venture capital will be crucial in bridging the funding gap and ensuring that promising startups can continue to innovate and grow. Minister Vaishnaw emphasized the program's flexibility, stating that it was developed through extensive consultations with all stakeholders.