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Why public capital isn’t enough to save India’s deeptech

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Why public capital isn’t enough to save India’s deeptech

Can government funds derisk deeptech enough to make private capital comfortable in India? Partly. The state is well placed to absorb technology risk. It is far less able to remove the two risks that actually keep fund managers awake: time and exit. Unless policy addresses those, India will get plenty of capital without much conviction behind it.

Start with the momentum, which is real. India’s AI and deep tech investment reached $2.1 bn across 289 deals in 2025, and deep tech share of total VC – PE activity has climbed to roughly 15%, up from 4% in 2016. The 2026 numbers look even better at first glance through August, Indian deeptech companies raised $2.22 billion across 179 rounds against $861 million across 287 rounds in the same period last year.

Look closer, though. Funding rose about 2.6 times while the number of rounds fell by nearly 40%. The average cheque went from roughly $3 million to over $12 million, a four-fold jump. Private capital is getting comfortable with deeptech companies that are already derisked. It is not getting comfortable with the derisking itself. Money is crowding into proven AI and hardware winners, and fewer new bets are being placed. That gap is exactly what public funds should fill.

The state’s toolkit is now large. The Research, Development and Innovation (RDI) Scheme, envisages a Rs. 1 lakh crore corpus over 6 years with Rs. 20,000 crore allocated in FY 2025-26 Union budget. 0. SIDBI is mandated to deploy Rs 10,000 crores through SEBI registered AIFs, with the government's stake alongside private investors, who comprise a majority of the Fund corpus.


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