DeepTech startups need a different playbook and a longer view, with early-stage focus on technological progress, validation and intellectual property
Published Date – 11 September 2026, 10:32 PM
Illustration: GuruG
By Rathnakar Samavedam
For over a decade, software-as-a-Service (SaaS) and consumer internet companies have shaped how people invest in India. SaaS, simply put, means businesses that provide software to customers through subscriptions or online platforms. We know this model well. Companies can build software relatively quickly, add customers without having to manufacture a new physical product for each one, and scale rapidly.
Thus, investors measure success with metrics such as Annual Recurring Revenue (ARR), Customer Acquisition Cost (CAC), profitability and how quickly a company can recoup the money spent on each new customer. They look at these numbers to decide where to put their money. However, using the same rules for the new generation of DeepTech companies in India is a mistake. DeepTech firms need different metrics and a longer view. It is more than a problem with numbers, and could affect how the country builds its most important technologies.
These companies are not simply writing software. Their innovations come from fields like physics, chemistry, biology, advanced materials and mechanical engineering. Whether a company is developing a space launch vehicle, a robot or a semiconductor, it can face years of research and development, expensive prototypes and complex supply chains before it earns its first significant commercial revenue. Expecting SaaS-like quarterly growth from them misunderstands the nature of DeepTech itself.
Tech Sovereignty
To understand why DeepTech needs a different approach, we need to look at how major economies around the world view technology.
The United States and China do not treat technologies such as semiconductors, robotics, aerospace and biotechnology only as investment opportunities. They also see them as important to their economic strength and national security. Technological sovereignty, thus, means having the ability to develop and control critical technologies within the country instead of depending heavily on other nations.
The United States has spent decades building systems that support high-risk research. Organisations such as DARPA, the US agency that funds advanced defence research, and NASA have supported technologies that can take years to develop. Government grants and research institutions also help reduce the early risks faced by such companies.
China has taken a similarly long-term approach. State-backed funds and industrial policies have directed capital towards areas such as chip manufacturing, robotics, batteries and advanced manufacturing. The objective is not always to generate a venture return within three years. It is also to build capabilities that can support the country’s economy and strategic interests for decades.
India is beginning to recognise the same need. The government’s Research, Development and Innovation (RDI) Scheme has a proposed corpus of Rs 1 lakh crore over six years, with areas such as quantum computing, robotics and space among its priorities. In February 2026, the government also introduced a dedicated Deep Tech Startup category, recognising that these companies require longer periods to develop. The eligibility window was extended to 20 years, with a turnover threshold of Rs 300 crore.
Rockets, semiconductors, robots, and eVTOL aircraft can take years of R&D, testing, and regulatory approvals before generating meaningful revenue. Investors must look beyond revenue and ask: What technological risk has been removed?
The private market is showing a similar shift. According to IVCA data published in August 2026, Indian DeepTech startups raised $2.9 billion in 2025, a record in a single year. It is expected to close 2026 with around $1 billion. According to the India Deep Tech Alliance, DeepTech makes up 15 per cent of all private equity and venture capital activity in India, compared with four per cent a decade ago.
The capital is coming in. But India still has a gap to close. The US and China have developed much larger pools of patient capital, research infrastructure and government support for technologies that may take years to commercialise. India has strong scientific talent and a growing startup ecosystem; however, the funding and institutional systems that would help DeepTech companies move from research to large-scale manufacturing are still developing and need support to succeed.
This matters because technological self-reliance cannot be built through software alone. India’s ability to build and control capabilities in areas such as semiconductors, space, robotics, defence and advanced manufacturing will increasingly determine its strategic independence.
Physical Innovation over Pure Code
The leaders of India’s DeepTech movement already show why the old framework does not work.
- Aerospace and defence: Companies such as Skyroot Aerospace and Dhruva Space are building physical rockets, satellites and space infrastructure. Their progress is measured through milestones such as propulsion tests, successful launches and satellite deployments — not by how quickly they can acquire software users.
- Urban air mobility: Companies such as ePlane Company and Sarala Aerospace are developing electric vertical take-off and landing (eVTOL) aircraft. Their progress depends on aerodynamic testing, battery performance, engineering and aviation safety certifications.
- Robotics and medical devices: Robotics companies such as CynLr and Perceptyne are combining computer vision with physical machines that have to operate in unpredictable real-world environments. Semiconductor and medical-device companies similarly require specialised manufacturing, testing and regulatory approvals before they can reach commercial scale.
These companies demonstrate why DeepTech cannot be judged only through the metrics that work for software businesses. If founders are judged against SaaS-style benchmarks too early, they can be pushed to bring untested hardware to market before it is ready, or move towards lighter software solutions simply because those businesses can show faster growth on conventional VC dashboards.
New Framework for Valuation
So how should DeepTech companies be evaluated?
One helpful way is to track Technology Readiness Levels (TRLs). TRLs simply show how far a technology has moved from an idea to a product that has been tested and is ready for real-world use. Investors should also look at intellectual property, such as patents, regulatory milestones, testing, manufacturing capability and early strategic contracts.
The focus needs to shift from asking, “How much revenue did this company generate this quarter?” to “What risk has the company removed?” Has the technology been successfully tested? Is the intellectual property defensible? Can the product eventually be manufactured at scale? Has a customer or strategic partner shown a willingness to use it?
A successfully completed rocket-engine test or a validated semiconductor design can represent significant value creation because it removes a major technological risk. That achievement may be far more important at an early stage than a modest increase in software subscriptions.
Revenue still matters, but its importance changes as the company matures. At the early stages, investors need to focus more on technological progress, validation and the strength of the underlying intellectual property. As the technology becomes commercially proven, traditional metrics such as revenue growth, gross margins, customer acquisition costs, recurring revenue and cash generation should become increasingly important.
India’s ambition to become a global technology powerhouse cannot rest entirely on software. We need to build domestic capital ecosystems that understand that some of the country’s most important companies may take longer to mature. DeepTech founders need the time and capital to solve difficult physical problems, test their technologies and build products that can eventually compete globally.
The goal should not be to abandon the metrics that made India’s software ecosystem successful. It should be to understand when they apply and when they do not. If India gets this right, we will not just create valuable startups. We will build the technological capabilities that can define the country’s economic and strategic independence for decades to come.
(The author is Investment Director & Managing Partner, Hyderabad Angels Fund)