Indian VCs And The Deeptech Dilemma
Skyroot has proved that homegrown startups can build rockets, but the bigger challenge may lie in funding them. A recent viral critique of Indian venture capitalists has reignited the debate over deeptech funding gaps, risk appetite of investors and slow diligence.
Founder Grievances: For many early stage founders, deeptech funding in India remains plagued by prolonged due diligence, demands for commercial traction before validation and an over-reliance on founder pedigree. Their criticism is aimed at the current system, which may be underwriting very little genuine technological risk and backing a handful of startups.
Concentration Problem: Data adds further nuance to the debate. Deeptech funding surged 176% YoY in Q3 2026, but the deal count barely moved. This is because most of the capital was heavily concentrated among a few players and that too in Bengaluru. The pattern suggests that the capital is largely flowing to technically validated companies, while early stage founders pursuing unproven scientific experiments still struggle to secure their first cheque.
Why Investors Hesitate? Indian VCs have historically been hesitant towards deeptech bets due to the sector’s long gestation cycles, uncertain exits, specialised diligence and substantial follow-on capital. Venture funds also operate under pressure from limited partners to mint returns and liquidity within defined timelines. As a result, most VCs hesitate to underwrite these uncertain scientific bets.
Changing Ecosystem: However, the picture is not entirely bleak. Founder-led vehicles and specialist funds are expanding and raising big bucks for moonshots. Government initiatives, like the ₹1 Lakh Cr RDI Fund, are also creating more optimism around deeptech. But capital alone will not solve the problem as local frontier ventures still need stronger follow-on funding, patient limited partners and the corporate willing to buy early products.
Indian founders have proved that they can build rockets, but can VCs now step in and show that they can finance these moonshot bets? Let’s find out…
From The Editor’s Desk
💸 Weekly Funding Rundown
- Indian startups cumulatively raised $130.2 Mn last week, down 29% from $184 Mn in the preceding week. However, deal count zoomed 88% week-on-week to 32. Cent and Simplismart took the biggest cheques home at $15 Mn and $14 Mn, respectively.
- Ecommerce emerged as the most funded sector last week, bagging $33 Mn across nine deals. Following suit were AI ventures, which bagged $30 Mn across five deals.
- On the investor front, Blume Ventures and Antler emerged as the most active investors last week and backed three startups each.
🛵 E2W Sales In October
- Electric two-wheeler registrations grew a marginal 2.9% month-on-month to 2.1 Lakh units in October. Sales also rose 48% YoY from 1.4 Lakh units a year earlier.
- Legacy giants TVS Motor and Hero MotoCorp recorded gains and improved their market share to 27.2% and 13.4%, respectively. However, Bajaj Auto reported a decline in sales in October, which led to its market share falling to 21.7% from 23.4% in September.
- Growth also tapered off for new-age EV makers in October. Ather’s registrations declined 1.8% to 30,380 units from 30,942 units in September, while its market share slipped to 14.2%. Ola Electric’s sales also tanked 13.7% MoM to 11,614 units last month.
🛒 Kickback Allegations At Flipkart
- Walmart has launched a probe into allegations that employees at the ecommerce giant received over ₹150 Cr in kickbacks from vendors. The charges have been directed against employees in Flipkart’s smartphones and luggage and travel accessories divisions.
- The complaints allege the certain employees accepted payments and favours from vendors in exchange for preferential treatment on the ecommerce platform, including greater visibility that helped drive sales.
- This is Walmart’s third investigation into alleged financial misconduct at Flipkart in the past three years. A previous probe resulted in three dismissals two-and-a-half years ago, while another investigation found wrongdoing by an employee barely six months ago.
🛡️ eMudhra & Accountability
- The cybersecurity firm came under fire last month after researchers discovered that its private keys were weak and could be recovered in under a second. The row saw eMudhra exit the global TLS certificate business altogether.
- The episode demonstrates that global browser makers, rather than local regulators, became the first line of accountability for eMudhra. This raises a governance question for India: who investigates and prevents a similar failure domestically?
- Experts now flag that eMudhra’s exit means that Indian websites may increasingly depend on foreign certificate authorities for trust. This could affect India’s digital sovereignty and its ability to build a domestic public-key infrastructure ecosystem.
📈 Bullish Week For Startup Stocks
- Of the 69 new-age tech stocks under Inc42’s coverage, 40 gained between 0.2% and 26.8%, last week. However, the remaining 29 declined by up to 22.3%. Startup stocks largely saw gains as quarterly earnings drove sharp moves in individual counters.
- Ather Energy and Zetwerk emerged as the biggest gainers, while shares of CarTrade and AceVector shed the most. The combined market-cap of these 69 stocks jumped to $160.9 Bn at the end of last week, up 5.7% from $152.3 Bn in the week-ago period.
- Going forward, investors will track the upcoming US midterm elections, Brent crude oil prices, geopolitical developments and quarterly earnings for market cues this week.
💰 upliance.ai Eyes $4 Mn
- The D2C home appliance maker in advanced talks to raise $3 Mn to $4 Mn in its Series A round. The fundraise will likely see participation from a fresh investor, while existing backers, including Khosla Ventures, will also double down.
- Founded in 2021, upliance.ai sells AI-powered kitchen appliances like food processors and air fryers. The D2C brand had last raised ₹34 Cr in a seed round led by Khosla Ventures in 2024 at a valuation of ₹143 Cr.
- The development comes amid growing activity in India’s smart kitchen appliances market, which is being driven by growing demand for automated products and rising disposable incomes. The space is projected to become a $3 Bn opportunity by 2032.
Inc42 Markets
Inc42 Startup Spotlight
How D-Propulse Is Rethinking Jet Engines
India has pursued indigenous jet-engine capability for decades now, but to no avail. This has created heavy dependence on overseas vendors and costly testing. D-Propulse is betting on a new technology to build lighter, cheaper propulsion for high-speed drones and missiles.
The RDE Approach: Founded in 2025, D-Propulse is developing rotating detonation engines (RDEs), which use supersonic detonation waves to generate thrust. It has already tested a 5 kN air-breathing RDE that is currently at technology readiness level-5. The startup claims its engine will be 15-25% more efficient and at least 60% less expensive than conventional ramjets.
Eye On The Prize: To scale its ambitions, the startup is also building a 5,000+ sq ft combustor test facility at IIT Madras, with air mass flow capacity of around 10 kg/sec and an in-house HPC cluster. It is also exploring infrastructure rental as an early revenue stream while its jet engine business takes shape.
Building For Defence: D-Propulse is targeting the Indian Armed Forces as its intended first customers. It now plans to conduct flight tests between June and December 2027 and limited series production by the end of 2028. The pre-revenue startup also plans to raise a Series A round by early next year.
With the global RDE opportunity projected to surpass $2.4 Bn by 2030, can D-Propulse build commercially viable jet engines for India?
Infographic Of The Day
From unicorns to promising new-age tech startups, here are the IIM Ahmedabad graduates that took the entrepreneurial route and built enduring companies in the Indian startup ecosystem…
