Here’s Why India’s New Deep-tech Startup Classification Could Be A Game Changer

India’s recent revision of startup recognition framework brings a significant update for deep-tech startups.

As per the revised framework, the eligibility criteria for being a deeptech startup has been extended from 10 years to 20 years from the date of incorporation or registration, and the turnover limit enhanced to INR 300 crore.

Here’s what the framework says:

“A new sub-category of “Deep Tech Startup” has been introduced for entities working on cutting-edge and breakthrough technologies. The core attributes of Deep Tech Startups have been finalised through consultations with line Ministries, Departments and ecosystem stakeholders to ensure clarity, consistency and objective identification. In recognition of the long gestation periods, high research and development intensity, and capital-intensive nature of deep technology enterprises, the eligibility criteria for this category have been expanded, with the age limit extended from 10 years to 20 years from the date of incorporation or registration, and the turnover limit enhanced to ₹300 crore.”

The revised framework comes amid India’s efforts to push the local deeptech innovation in the country. It’s worth highlighting that India’s startup boom has largely benefited select categories such as fintech with VCs being reluctant to invest in long-term projects. As part of a renewed push, India has introduced a massive INR 10,000 crore to INR 20,000 crore Deep Tech Fund of Funds (DTFoF).

Also, DPIIT had earlier one definition for all startups: under 10 years old and below ₹100 crore in revenue.

“But if you’re building deeptech like semiconductors, medical devices, or advanced materials, you can spend 5 to 8 years just in R&D and regulatory approvals before seeing real revenue. You’d age out of benefits like Section 80-IAC tax exemptions right when you’re ready to scale. The revised framework fixes this. DPIIT has relaxed turnover limits and created a separate category for deeptech, recognizing that building core technology just takes longer,” Bharath Rankawatt, CEO & Founder of Enlog, explains the importance of the revision.

Rankawatt adds that it gives breathing room to deeptech startups in the short-term as startups can now focus on getting the tech right without rushing commercialization just to stay eligible for support. And as far as long-term impact goes, it helps build IP-led, engineering-heavy companies that can compete globally and create real strategic value.

“A separate classification was necessary because deeptech faces fundamentally different challenges: higher scientific uncertainty, longer validation cycles, dependencies on regulation and infrastructure. You can’t “move fast and break things” when designing chips or medical devices. The old framework expected VC-style speed from technologies that simply can’t move that fast,” he said.

Rankawatt notes that the VC lens is also evolving alongside this. It’s not just about having deeptech in your portfolio for signaling anymore. There’s a growing recognition that backing these companies requires patience, deeper technical diligence, and a genuine understanding of the science.

“When that alignment happens between policy, capital, and founder timelines, that’s when we’ll see real momentum,” he said.

Biswajeet Mahapatra, Principal Analyst at Forrester also echoes Rankawatt’s views that in the short term, the framework reduces pressure to commercialize prematurely and improves access to patient capital, grants, and government support by providing regulatory certainty.

“In the long term, it increases the likelihood of globally competitive outcomes by allowing deep tech firms to mature, build defensible IP, and scale manufacturing without losing startup benefits, which justified a separate classification because deep tech ventures operate on fundamentally longer, riskier, and more capital-intensive cycles than software or consumer startups,” Mahapatra added.

Dhananjay Yadav, Co-Founder & CEO at NeoSapien, gives a detailed overview on the short-term and long-term impact of the framework revision for deeptech. He told Entrepreneur India:

“Special classification aligns policy with reality. Deeptech startups fail when they are forced to behave like SaaS companies too early.

In the short term, it reduces pressure to generate premature revenue and improves access to grants, pilots, and early validation, supporting R&D-heavy phases where commercial outcomes are still evolving.

In the long term, it allows founders to build globally competitive, IP-led companies and increases the likelihood of breakthrough innovation rather than incremental products.

This classification was necessary because, globally, deeptech success has always depended on delayed monetisation and patient capital. Companies like SpaceX took nearly seven years before meaningful commercial revenue, with early years dominated by failed launches and

R&D. DeepMind similarly operated for almost a decade without revenue, focusing purely on research before commercial applications emerged. These outcomes were possible only because the ecosystem allowed deep capability-building before monetisation.”

Deeptech matters

India’s deeptech has immense potential, and it did get momentum in terms of VC funding too. For instance, Java Capital recently launched INR 400 crore deeptech-focused fund to invest in seed-stage startups building IP-led technology companies. Over the years, funded companies have cumulatively raised $9.73B in venture capital money and private equity, according to Tracxn. But is the newfound momentum good enough?

Rankawatt explains that India’s deeptech ecosystem faces the following core challenges: long R&D timelines, massive capital requirements, and an ecosystem that historically expected quick returns. Globally, the US and EU align policy and funding around technical milestones, not just revenue. India moving in this direction shows we’re understanding how foundational technology actually gets built.

“The core challenges so far have been a lack of patient capital, weak government and enterprise procurement, and poor lab-to-market translation. As a result, deeptech has historically been difficult to build in India despite strong research talent,” adds Yadav of NeoSapien.

Having said that, deep tech is critical for India’s economic resilience, strategic autonomy, and move from services to IP-led manufacturing in areas such as semiconductors, biotech, energy, and AI infrastructure. And the revised startup framework recognises that deeptech companies don’t follow the same growth timelines as SaaS or consumer internet startups. Instead of evaluating them primarily on short-term revenue, it acknowledges long R&D cycles and focuses on long-term technology creation.