India’s defence tech sector has attracted USD 711 million in all-time equity funding across 232 rounds in 2025, with total funding doubling in deployment, according to a recent Tracxn report. 

According to the report, annual funding has risen from USD 5 million in 2016 to a peak of USD 247 million YTD in 2025. Funding increased from USD 37 million in 2021 to USD 75 million in 2022, then to USD 139 million in 2023, and to USD 125 million across 42 rounds in 2024. 

Despite a lower number of rounds in 2025 YTD (30 rounds), total funding nearly doubled year-over-year, largely driven by Raphe mPhibr’s USD 100M Series B round led by global investments firm General Catalyst. The number of annual funding rounds increased from 5 in 2016 to 42 in 2024, before moderating in 2025 YTD.

General Catalyst said in a statement that it has long believed in India’s strategic importance at the fulcrum of global competition.

“This marks our largest investment in India’s defense ecosystem, a critical part of our broader commitment to building Indian resilience. The Government of India has advanced a bold vision to reshape its defense landscape: accelerating modernization, expanding strategic investments, and forging strong public-private partnerships to create a robust domestic ecosystem. With roughly a quarter of its annual defense budget earmarked for capital expenditures, the country is investing heavily in both hardware and software innovation. This strategic clarity presents a generational opportunity to support India’s growth,” said the statement. 

The Tracxn report also noted that defence tech in India is no longer defined by individual platforms, but by integrated systems spanning AI, autonomy, ISR, secure communications, and manufacturing depth. Policy reforms, rising defence budgets, and geopolitical imperatives are pushing startups to heightened innovation. The sector is evolving into a crucial pillar for national infrastructure, linking military readiness, industrial capacity, and long-term economic value.

As of 2025 YTD, defence tech funding in India remains heavily front-loaded. Seed-stage companies raised approximately USD 118 million across 174 rounds, early-stage companies absorbed USD 527 million across 56 rounds, and late-stage funding totaled USD 66 million across just 5 rounds. 

Funding across India’s defence tech value chain remains heavily tilted toward infrastructure-led plays. Non-combat systems dominate capital inflows with USD 551 million raised, far outpacing combat weapon systems at USD 106 million. Defence support and enablement systems and training and simulation solutions have each attracted a more modest USD 27 million.

This imbalance is mirrored in market composition. Nearly three-quarters of defence tech startups (74 per cent) operate in non-combat systems, while combat weapon systems account for 15 per cent. Defence support and enablement players make up 6 per cent of the ecosystem, and training and simulation solutions comprise the remaining 5 per cent.

Exit activity, while still sparse, offers early signals of maturity. Since 2010, the sector has seen five IPOs and three acquisitions, underscoring a nascent but gradually evolving exit landscape.

Considering innovation hubs, Bengaluru emerged as the most funded city with defence techs raising USD 216 million across 61 rounds, followed by Noida with USD 168 million across 19 rounds, followed by Chennai with USD 88 million across 26 rounds. 

Venture Capital firms, close to 116, participated in India’s defence tech startup funding to date, with Venture Catalysts leading the pack with 6 rounds, followed by HDA Tech Growth, Inflection Point Ventures, and Accel with 5 rounds each. 

Mahendran Balachandran, Partner at Accel, said that the past decade has seen a material shift in India’s defense landscape, driven by government policy changes that emphasize domestic production and procurement as strategic imperatives. 

“Programs like Make in India underscore an aggressive push to develop domestic capabilities in critical military technologies. Among them, aerial platforms such as drones and UAVs, which have become central to defense modernization, require powerful, adaptable propulsion units – this is the precise opportunity that Nabhdrishti (Accel Portfolio Company) is addressing. Additionally, the fuel-flexible design of Nabhdrishti’s engines presents opportunities beyond defense, with the potential to strengthen distributed power generation value chains and accelerate the transition to greener, more sustainable fuels,” said Balachandran. 

Overall, India’s defence tech ecosystem is entering a more discerning phase of growth. With USD 247 million raised in 2025 year-to-date, the highest annual inflow so far despite fewer deals, capital is clearly consolidating around non-combat systems and a handful of scaled platforms, underscored by the emergence of a USD 100 million mega round. 

While seed-stage interest remains wide, the continued scarcity of late-stage funding signals a shift toward execution-heavy, platform-led capabilities, marking a transition from experimentation to more outcome-driven defence innovation.