Indian VCs Want to Invest in Deep-Tech Startups Despite Govt Skepticism
India’s startup ecosystem is evolving beyond just app building and IT services, with venture capitalists now backing startups building hardware, AI, robotics, and even space infrastructure. Deep tech, long considered risky and niche, is now attracting attention, capital, and cultural validation. At Startup Mahakumbh 2025 in New Delhi, commerce minister Piyush Goyal urged Indian startups to shift focus from convenience apps like food delivery to deep-tech innovations like AI and semiconductors, sparking a heated debate. While some investors agreed on the need for ambition, investors like Kushal Bhagia, founder at All In Capital, also defended their investments (like PierSight and Bellatrix), highlighting India’s global edge. “There’s never enough tech investments. There’s never enough focus on deep tech,” said Narendra Bhandari, partner at early-stage venture capital firm Seafund, in an exclusive interview with AIM. The firm has recently invested in startups across semiconductors, space tech, and AI-powered health tools. Over the past decade, India’s deep tech landscape has shifted from being just a software services mindset to hoping to be a builder of foundational technologies. Bhandari believes the change has pushed more people to experiment and build. The movement goes beyond mobile apps and payment systems. India is now seeing startups emerge in defence, computing, and space technologies. “There’s a spectrum of stuff that has come out from fintech, payment infrastructure, and tech for social and commerce. You see vertical after vertical in India being enabled by technology,” he said. Change in Mindset, Riskier Bets Venture capitalists are also no longer just funding innovation but also guiding founders, building connections, and helping startups with technical difficulties. They are mostly engineers by education, and having done operational work, can participate in more than the financial part. According to Bhandari, a change in mindset has made this shift possible. He believes that founders today don’t need to justify their career choices to parents and potential in-laws. “Almost 25 years ago, I’ve had people come into the office and say, I’d like you to meet my potential father-in-law,” Bhandari recalled. “I don’t think that’s a cultural problem today.” This mindset shift is strengthened further by access to mentorship, government support, and most importantly, capital. Today, there are more investors at an angel level who are willing to invest small amounts. Bhandari said investors like him are taking riskier and more technical bets with time. AI Is Not Just a Buzzword At Elevation Capital, partner Vaas Bhaskar believes AI is becoming a foundational element, not just an added feature. “Just the way they are architecting themselves from day zero, how the engineering, service and product teams are running, it’s quite different,” he told AIM. He noted the lean, AI-native structures of younger startups, acknowledging that very few people can create products and serve various customers with small, lean teams. AI is no longer confined to core tech companies. Even fairly physical and established companies, like consumer brands, are thinking AI natively in some of their functions. Elevation believes that India’s strength lies not just in exporting talent but in leveraging it domestically. “I think we now have the best talent in the country and have built a vibrant ecosystem for that talent,” Bhaskar said. Building with Batteries and Bots Energy, automation, and robotics are emerging as critical deep-tech sectors for Seafund. India’s dependence on imports and labour transitions drives innovation in these spaces. “Energy could mean batteries, EVs, and drones, because all of this, in some ways, helps with getting things done, with lower energy,” he said. In the automation sector, he pointed out a specific societal driver: “One of the problems, they’ll say, is that there’s not enough farm labour available. People are moving to towns, and people from towns are moving to bigger cities.” Seafund has already backed companies like Genrobotics and others in robotics and is actively evaluating opportunities in biotechnology and genomics. Satellites, Chips and Fraud Detectors Back at Seafund, the portfolio reveals how deep tech in India is expanding across industries. In space tech, the startup TakeMe2Space is addressing the growing demand for global satellite communication. “The number of satellites across the world is gonna grow significantly because we all need to communicate all the time,” said Bhandari. “The need for communication is ever-growing in mapping, weather, traffic, natural disasters, mining, and armed forces.” For compute infrastructure, Seafund is backing Calligo Tech, which is developing semiconductor solutions that reduce power consumption during data processing, a critical bottleneck as AI demand strains computing capacity. Bhandari believes that any technology that can compute faster, with less power, and with higher precision will have a market. “To the extent that Sam, Elon, and all these guys are saying, ‘Our GPUs are fried.’” In health tech, Consint.ai uses forensic AI to detect fraud in insurance claims, an application with broad potential. Now, technology in forensics is not just assisting in health insurance. “Forensic tech can detect fraud, which humans, doctors, and nurses, sitting and watching the claims, will not be able to detect,” he said. What Investors Want While technology is essential, Seafund and Elevation prioritise problem clarity, founder mindset, and customer obsession. Bhandari outlined a structured framework for evaluating deep-tech startups. “The first thing we have to understand is the problem they are solving,” he said. Then comes assessing the team and their approach to solving it. “Is the team capable of solving the problem? Or at least, can they go down that path?” He added that a technical background within the fund helps the investors move faster. It would help them accelerate the conversation with the startup. Even post-investment, Seafund continues to provide business support. “We can certainly help build sounding boards for them. And then most importantly, we can help their business progress based on our network,” he said. Elevation, which has invested in many household names like Meesho, Swiggy, and Paytm, looks for similar principles. “It’s customer obsession. They just think about every customer backwards, and are very obsessed with the customer pain point,” said Bhaskar. “And that takes time. That takes a number of failures along the way.” He emphasised that domain depth is key for AI-driven innovation. “Somebody has to really obsess on that one small sliver of a process and build a product which truly replaces it rather than just some fringes and whistles on the side.” India’s Deep-Tech Moment or Missed Chance? Government support has improved, with schemes like the Design Linked Incentive (DLI) programme helping startups reduce costs and take products to market. “You are able to experiment. If you deliver, you get paid back. It’s a great start,” Bhandari said. Still, he believes India has a long way to go. “We need more of it, a lot more of it,” he said. “We need to continuously invest at a private level and at a government level.” When asked about India’s position in the global tech race, VCs agree that India has an opportunity to lead in deep tech, but it must act quickly. “We need to do more. I don’t think anybody’s confused about the fact that many countries are doing a lot more than us,” said Bhandari. The country needs to provide more capital, access, guidance, and solve problems,” he urged. Bhaskar highlighted two key trends for India’s AI opportunity: building software for Indian markets like SMBs and healthcare, and expanding access. Ultimately, the question doesn’t seem to be whether India can build deep tech but whether it will do so fast enough. [Correction: Seafund’s investment was in Genrobotics, not Swayaatt as previously stated.]
“We need to continuously invest at a private level and at a government level.”
“We need to continuously invest at a private level and at a government level.”
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["AI", "Aim", "RAG", "AWS", "R", "Go", "API", "automation", "innovation", "startup"]
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