American technology journalist Ashlee Vance's criticism of Indian VCs has triggered a debate, with founders questioning investors' risk appetite and prominent investors including Antler's Nitin Sharma, Chiratae's TC Meenakshisundaram and Unacademy's Gaurav Munjal offering competing perspectives
Indian deeptech funding surged 176% YoY to $290 Mn in Q3 2026, but deal count slipped from 29 to 28. Meanwhile, the median investment size across the broader startup ecosystem remained unchanged at $3 Mn, raising questions about how widely the funding recovery is being felt
From historical deeptech investments and a wave of dedicated VC funds to corporate procurement, LP expectations and the government's ₹1 Lakh Cr RDI scheme, India's deeptech financing ecosystem is evolving, but gaps in early-stage risk-taking and long-term capital persist
On July 18, 2026, Skyroot Aerospace achieved a historic milestone when its Vikram-1 rocket successfully placed satellites into orbit, becoming the first privately developed Indian rocket to accomplish an orbital launch.
For a country whose space programme was historically dominated by ISRO, it was a powerful demonstration of what Indian entrepreneurs could achieve in advanced technology.
Three months later, Ashlee Vance — the American journalist best known for his bestselling biography of Elon Musk and reporting on the global space industry — turned his attention to India’s technological ambitions.
His question was less about the capabilities of Indian engineers than the willingness of Indian investors to back them. He asked:
“Why are Indian VCs so afraid to take risk and make money?”
The October 22 post accompanied Vance’s Core Memory feature exploring India’s emerging hardware economy.
After three weeks meeting 15 Indian companies, Vance appeared impressed by the technological ambitions of their founders but far less enthusiastic about the state of the country’s venture capital ecosystem. He subsequently doubled down, claiming he had rarely encountered a market where VCs had a worse reputation among founders.
What followed was an unusually candid debate.
Founders complained about investors demanding commercial traction before technologies had been validated, prolonged diligence processes and excessive dependence on founder pedigree.
Investors pushed back, highlighting India’s growing list of deeptech successes, the increasing availability of specialist capital and the structural challenges of financing scientific innovation.
But the timing makes this debate far more consequential than another disagreement on X.
As AI threatens to automate parts of the software-services industry that helped establish India as a global technology powerhouse, the country’s ability to create and own foundational technologies is becoming increasingly important.
India has demonstrated that its entrepreneurs can build complex technologies. The more difficult question is whether venture capital and private equity can repeatedly back such breakthroughs.
One of the strongest responses came from Akash Kulgod, founder of Dognosis, which is developing canine-assisted cancer detection technology.
In a detailed post, Kulgod compared his experience interacting with approximately 80 investors, around 65% of whom were based in the US. His criticism ran deeper than simply stating that Indian VCs rejected his startup.
He said US investors typically made relatively quick decisions, rejecting the opportunity when they lacked conviction in the technology or founding team.
Some Indian investors, he alleged, extended discussions over repeated meetings and visits, only to demand commercial traction or stop responding. For a company developing medical technology, any delays in the development cycle hurt.
Clinical validation, technical testing and regulatory approvals can require years before meaningful commercial revenue becomes possible.
An investor demanding revenue before the technology is proven may effectively eliminate the opportunity instead of properly evaluating the technology.
Kulgod also questioned whether some investors possessed the technical understanding needed to assess unfamiliar scientific problems.
Other founders raised concerns about investor dependence on IIT or IIM credentials, professional networks and the reputations of existing backers when evaluating early-stage startups.
These are undoubtedly individual accounts, not evidence that such practices are universal across Indian VC firms. But they expose an uncomfortable question.
If investors require commercial traction, institutional validation and another investor’s conviction before writing a cheque, how much technological risk are they actually underwriting?
There is an important difference between financing a technology after it works and financing the experiment that determines whether it can work.
Deeptech needs both. And as the experience of several founders in India shows, the latter remains one of the most difficult investment decisions.
According to Inc42 DataLabs, Indian deeptech startups raised approximately $500 Mn across 87 deals in 2025.
The sector emerged as one of the most active by deal count, but its funding remained substantially below fintech’s $2.5 Bn, enterprise tech’s $1.8 Bn and ecommerce’s $1.7 Bn.
The latest quarterly figures, however, suggest that investor preferences are changing.
In Q3 2026, deeptech startups raised $290 Mn across 28 funding deals, compared with $105 Mn across 29 deals in the year-ago quarter.
Funding surged 176% YoY, dramatically outpacing the broader startup ecosystem’s 5% growth.
Deeptech funding nearly tripled, but the number of funded deals actually declined.
Pixxel’s $100 Mn funding round alone accounted for approximately one-third of the deeptech capital deployed during the quarter.
Bengaluru captured around 65% of the sector’s funding.
At the broader ecosystem level, investors also wrote larger seed cheques to fewer companies. Early stage funding fell 18% YoY to $164 Mn across 93 deals, even as the median cheque size increased 20% to $1.2 Mn.
The contrast with the first half of 2026 is instructive.
According to Inc42’s H1 2026 funding report, advanced hardware and technology startups raised $365 Mn across a record 66 deals, reflecting an 18% rise in funding and a 53% jump in deal volume.
That suggests improving breadth of investment during the first half, followed by greater concentration in the third quarter.
There’s no trend to explore here, but this disparity demonstrates why headline funding growth is an insufficient measure of access to capital. Larger investments are increasingly flowing towards a smaller pool of technically validated companies.
So the deeper question is whether more first-time founders pursuing unproven technologies are securing their first institutional cheques, which strikes at the heart of what Vance was saying.
A separate debate over India’s startup funding priorities had already exposed a fundamental divide between founders and investors over where venture capital should flow.
In an October 17 post on X, Neosapien founder Dhananjay Yadav questioned why consumer-service startups burning substantial amounts of capital could attract large investments, while deeptech companies generating higher revenues with lower cash burn struggled to raise even a fraction of that money.
Responding to Yadav, Untitled Ventures’ Anmol Maini made a provocative claim that much of deeptech could eventually prove to be a “grift”, arguing that quick commerce and on-demand services might contribute more to the economy.
Blume Ventures partner Arpit Agarwal offered an explanation rooted in investment economics.
Investment capital, he argued, gravitates towards opportunities offering lower perceived risk or disproportionately higher returns.
The distinction to note here is that the economic importance of a technology and its attractiveness as a venture investment are not necessarily the same thing.
This is consistent with concerns Agarwal had raised in an earlier interview with Inc42, where he explained why capital-intensive original equipment manufacturing (OEM) businesses are often poorly suited to conventional early-stage VC financing.
Pixxel founder Awais Ahmed, however, challenged the notion that consumer internet and deeptech should be competing for relevance and the same pie of venture capital.
In a detailed post, Ahmed argued that they represent different layers of the same technological economy.
A ten-minute grocery delivery depends on decades of breakthroughs in semiconductors, GPS, lithium-ion batteries, cellular networks and computing — technologies developed long before their commercial applications became apparent.
Consumer businesses make technology accessible at scale. Deeptech expands what technology can achieve.
Ahmed acknowledged that successful internet companies create wealth that can eventually be reinvested into deeptech. But foundational technologies cannot simply be treated as investments to pursue once quicker commercial opportunities have been exhausted.
Developing competitive capabilities in semiconductors, aerospace, advanced materials or energy requires years of research, specialised talent, experimentation and industrial infrastructure.
And therein lies India’s venture capital allocation dilemma.
The country has spent the past decade building a thriving consumer internet economy. But its ambition to emerge as a global technology powerhouse will require investing in foundational technologies long before their commercial returns become predictable.
Unacademy cofounder Gaurav Munjal was among the prominent voices challenging Vance. In a response on X, Munjal described the assessment as dated and rage-baiting.
He pointed to Astrobase, Airbound and Sarvam AI as examples of ambitious companies successfully raising capital, while highlighting the outcomes achieved by Groww, Eternal and Meesho.
His broader argument was that India’s VC ecosystem had improved dramatically, and that fintech and digital commerce remained important opportunities given the size of the domestic market.
Ather Energy attracted early support from IIT Madras-linked programmes, the Flipkart founders, Tiger Global and Hero MotoCorp before eventually becoming a listed company.
Skyroot has achieved orbital launch capability. Agnikul has demonstrated indigenous launch technology. Pixxel is developing hyperspectral satellites, while Airbound is attempting to commercialise autonomous aircraft.
Munjal’s point was that these achievements challenge the idea that India lacks investors willing to finance complex technologies.
Nevertheless, several high-profile deeptech startups have relied significantly on overseas capital. Airbound’s $37 Mn Series A, for instance, was led by US-based Greenoaks.
An Indian startup’s ability to attract international investors is a sign of some success for the company, but it does not necessarily establish that domestic investors are equally willing to finance such technologies.
Still, Munjal’s argument gains weight from his own next move.
Along with Unacademy cofounder Roman Saini, he is raising a ₹700 Cr fund called Longshot Capital, targeting AI, manufacturing, robotics, spacetech and defence.
It represents a growing pattern: founders who created wealth and operating expertise through India’s first startup generation are increasingly attempting to finance its next.
Antler India partner Nitin Sharma offered one of the more balanced assessments.
In a detailed October 24 post, Sharma acknowledged that India’s venture ecosystem had historically failed to generate consistent venture-scale returns partly because investors avoided genuine venture risk.
But he argued that the situation had begun changing.
Sharma identified two categories of founders increasingly receiving backing: the first being experienced technologists and academics, and the second category covering young, unconventional self-taught entrepreneurs.
Sharma said Antler had acted as the first institutional believer in 10 deeptech ventures since 2022.
He highlighted Antler’s investments in companies such as InspeCity, Aspera Aerospace, Green Aero Propulsion, Meine Electric, Mandrake Bio and Armory Shield.
His argument went beyond showing that VCs were willing to invest before revenue. Historically, he explained, early-stage investors were reluctant to back complex technologies partly because they could not identify who would finance those companies in subsequent rounds.
That problem is beginning to ease as specialist funds and larger deeptech investors emerge.
But Sharma acknowledged that India still needs more investors willing to write larger first cheques for ambitious technological bets.
He also identified another serious challenge: demand.
Indian deeptech startups, he argued, struggle to secure paid pilots and procurement opportunities from domestic corporations, particularly outside defence and space.
If Indian companies refuse to become early customers, startups must finance not only technological development but also the prolonged process of creating a commercial market.
India’s investor appetite may be improving. But the institutional and structural environment around deeptech financing and commercialisation must improve with it.
While newer specialist funds are attracting attention, established Indian VC firms have also been investing in deeptech for years.
TC Meenakshisundaram (TCM), cofounder and vice-chairman of Chiratae Ventures, offered a historical perspective in an X thread responding to Vance.
He acknowledged that until 2020, many Indian VCs — including Indian arms of Silicon Valley funds — were reluctant to back hardware and deeptech startups. Concerns over global competitiveness, licensing and certification requirements, the availability of follow-on capital and long investment holding periods have all contributed to this reluctance.
But he argued that the situation had since changed, highlighting companies such as Quanfluence, TakeMe2Space, Cavli Wireless and Metadome.
Chiratae’s investment record supports that counterargument.
Founded in 2006 by Sudhir Sethi and TCM, the firm reports having deployed more than $300 Mn across over 60 deeptech companies spanning AI, climate technology, healthcare, robotics, spacetech and advanced manufacturing.
In December 2025, it launched its Sonic DeepTech programme to accelerate seed-to-Series A decisions, offering cheques of up to $2 Mn.
By May 2026, Chiratae had announced commitments of up to $10 Mn across five startups selected through the programme.
And Chiratae is hardly alone.
This is a counterpoint to the suggestion that Indian VCs have uniformly avoided advanced technologies. But the criticism is also valid, and therefore it raises the question of how deeptech investment should be measured.
The category includes everything from software-led AI applications to capital-intensive aerospace, advanced manufacturing and medical technologies, each carrying different levels of scientific uncertainty and commercial risk.
The more meaningful measure is not simply how many deeptech companies a fund has backed. It is how early the fund entered, what technical risks it financed and whether it supported those companies through subsequent development cycles.
Founders frequently identify seed funding as their biggest obstacle. Some deeptech investors believe the more serious capital shortage appears later.
Speciale Invest, for instance, outlined plans for a ₹1,400 Cr growth-stage fund targeting companies that have demonstrated technical capabilities but need larger amounts of capital for manufacturing and commercial expansion.
A company like Skyroot, which is making rockets, requires funding for design, testing and initial launches. But technological success is only the beginning of the journey towards reliable commercial operations.
Similarly, a semiconductor company may develop a functioning chip but still need substantial capital for fabrication, qualification and customer adoption.
Deeptech businesses require a continuous financing pipeline.
The problem for India is the insufficient seed capital for highly speculative technologies and inadequate growth capital for technically validated companies. Both gaps exist simultaneously.
When the next investor is missing, even the first investor becomes more reluctant to take the risk.
Siana Capital’s Siddharth Shah raised another structural issue in his response to the debate.
He argued that India’s venture capital ecosystem is constrained by the expectations of limited partners — the investors financing venture funds.
Deeptech companies can require 10–15 years to achieve meaningful commercial maturity. Yet VC funds often operate within shorter investment and distribution timelines.
One problem is LPs seeking distributions while portfolio companies were still working towards critical technical or commercial milestones.
He also highlighted weak secondary liquidity, difficult exits and the limited availability of long-duration domestic institutional capital.
US-based investor Anu Hariharan raised related concerns about taxation, currency exposure, operational complexity and limited M&A opportunities.
The H1 2026 Inc42 funding report offers another perspective.
While 64% of surveyed institutional investors said they expected to increase their venture capital allocations, respondents also identified geopolitical uncertainty and constrained global liquidity as major risks.
Investor expectations around exits have also shifted. Strategic acquisitions and secondary transactions are increasingly important alternatives to IPOs, particularly for companies unlikely to reach public-market scale quickly.
The problem is that risk appetite is shaped by the economics of the entire investment value chain.
LPs want returns and liquidity. VCs need successful exits to raise their next funds. Corporate customers want proven products. Founders need financing to prove those products work.
Each participant may be making a rational individual decision. But collectively, those decisions can produce a system in which everyone expects somebody else to absorb the earliest uncertainty.
That does not absolve VCs of responsibility for poor diligence or insufficient conviction.
Changing India’s deeptech investment culture will require more than persuading fund managers to be courageous.
There is, however, evidence that the supply of dedicated capital is growing.
In the past year alone, India has seen a wave of new funds and investment vehicles targeting AI, spacetech, semiconductors, advanced manufacturing, energy and industrial technologies.
Aakrit Vaish, the former Haptik CEO, and Pratyush Choudhury launched AI-focused VC firm Activate in December 2025.
By September 2026, Activate had closed its investment platform at $105 Mn, comprising an $85 Mn early-stage fund and $20 Mn deployed through growth investment vehicles.
Its portfolio includes investments in Sarvam AI, ElevenLabs and Wispr Flow, alongside early-stage bets that have not been publicly disclosed.
The fund’s investor base includes founders, AI researchers, global VC partners and family offices — a different pool of capital from the institutions that traditionally dominated Indian startup financing.
Meanwhile, Transition VC launched a ₹1,500 Cr second fund in July, targeting energy transition, advanced manufacturing and industrial deeptech businesses.
Unlike many conventional seed funds, Transition VC plans to write $2 Mn-$5 Mn cheques into engineering-led startups demonstrating technical feasibility and early commercial traction.
The investment strategies differ, but the pattern is becoming more visible.
The emergence of these funds suggests that India’s financing ecosystem is becoming more specialised. But their mandates also demonstrate that deeptech capital is not interchangeable.
Longshot and AUM are targeting early-stage opportunities. Piper Serica and Speciale’s proposed growth fund focus on companies further along their development journeys. Transition VC targets engineering-led businesses that have already established technical feasibility.
YourNest’s continuation fund addresses another problem: providing additional time and liquidity for existing portfolio companies rather than financing entirely new startups.
More capital is entering deeptech. The unanswered question is whether these different sources of funding will connect to create an uninterrupted financing pipeline from research to commercial scale.
The government is also attempting to address the patient-capital shortage. And government policy is also beginning to shape private investment decisions.
Its ₹1 Lakh Cr Research, Development and Innovation scheme is designed to support high-risk, research-intensive technologies.
In October, the government approved 19 second-level fund managers with commitments totalling ₹7,131 Cr.
That is a significant development, although the overall scheme outlay should not be confused with capital already deployed to startups.
According to Inc42’s H1 2026 investor survey, 61% of respondents said the India Semiconductor Mission had influenced their investment thesis for deeptech and hardware, while 66% said the IndiaAI Mission had influenced their AI investment thesis.
But this policy support does not automatically translate into greater appetite for every type of frontier technology.
Inc42’s Q3 2026 survey of more than 85 institutional investors found that 39% expected vertical AI applications to capture the most value over the next five years, compared with 23% favouring AI hardware and semiconductors and 14% backing sovereign foundation models.
Investors are interested in foundational technologies, but their expectations of where AI value will accrue remain weighted towards applications. These are survey preferences, not actual deal allocations, and the reality of the investments of these funds will differ from their responses.
Nevertheless, they suggest that even within a booming technology category, investors remain selective about where value is most likely to accrue.
The RDI programme itself has faced questions over governance.
In our Q3 survey, 52% of respondents considered existing disclosure and recusal safeguards adequate but said transparency remained limited. A quarter of the respondents (25%) called for independent oversight.
The government’s role will therefore need to extend beyond announcing larger financing schemes.
Transparent allocation, research commercialisation, industrial procurement and access to testing infrastructure will influence whether policy support ultimately produces sustainable companies.
India’s spacetech reforms offer one example of what coordinated support can achieve.
Skyroot and Agnikul’s technological progress cannot be separated from the policy changes and institutional infrastructure that enabled private participation in the country’s space economy.
The next challenge is to build similarly effective pathways across semiconductors, advanced materials, medical technologies, energy and industrial automation.
It is no longer whether India can produce another Ather, Skyroot or Pixxel.
It is whether an unknown scientist or engineer with a genuinely ambitious idea can access the capital, research infrastructure, industrial customers and follow-on investment needed to attempt something equally difficult.
Not every rocket will reach orbit. Not every chip will work. Not every scientific breakthrough will become a commercially viable company.
But financing those uncertain attempts is precisely what allows an innovation ecosystem to produce breakthroughs at scale.
India has proved that its founders can build rockets. Now it must prove that its capital ecosystem can finance the next hundred, including the ones that never leave the launchpad.
Source: Inc42
