Gamble for Greatness: Can India Create Its Own Venture Capital Ecosystem?

What’s common between Nvidia, Apple and Microsoft? Apart from being tech companies, they are all American, and together they are worth over $10trn, almost three times the size of the Indian economy.

All these tech titans are a product of a financial system that is designed to bet on improbable brilliance. According to Amazon founder Jeff Bezos, the US has the biggest tech companies because of an abundance of risk capital. For decades, it has been a country where a start-up founder can raise $50mn with a 10% chance of success.

While the US model has banked on private capital, the Chinese formula has been to channelise funds through policy banks, provincial governments and industrial guidance funds. This is what sustains the bold bets of companies like BYD and Huawei for years.

Both models share one crucial trait: they put large amounts of patient capital behind long-term bets, something India has yet to replicate. While the US routes the lion’s share of its venture capital/private equity (VC/PE) funds from pensions and college endowments, India’s largest institutional pools—LIC and EPFO—steer clear of such risk.

The result is that the most ambitious of our tech start-ups are at the mercy of foreign money. Sometimes they are compelled to flip to the US or Singapore for want of funding. Sometimes they shut down.

Technology is no longer neutral. Nations now wield it as a geopolitical weapon. The US has already banned exports of Nvidia’s most advanced AI chips to China and Russia, and has even sought to restrict how much India can buy. In another surprising move, the Trump administration has decided to take a 10% stake in Intel to underline its seriousness about the AI race. It won't be a stretch to say that large language models trained in Beijing will never serve Indian interests, just as American ones will always advance America’s.

The hard-nosed trade negotiations of the US with India are designed to ensure capital flows remain under its control. Nations aim to direct investments toward themselves.

This month’s cover story examines the new breed of homegrown fund managers who are backing India’s nascent deep-tech bets, powering domestic fintech and e-commerce platforms, and re-investing the returns in the country’s start-up ecosystem.

But the uneasy truth is that 51% of the capital managed by them is courtesy of foreign limited partners. The road to changing that balance lies in building a patient, risk-embracing domestic capital pool that backs Indian tech start-ups.

The solution is not straightforward. It demands a calculated gamble by allowing India’s pension funds, banks, insurers and college endowments to allocate a significant chunk of their corpora into VCs and PEs. These funds can be matched by the government, hedged with sovereign guarantees or sweetened with tax breaks.

None of this guarantees success though. India took the risk in the first decade of the millennium by creating a credit boom through its state lenders. Many of the bets helped accelerate the growth of the country’s biggest business houses. But a lot of those large loans went sour as well. Talking heads said India’s banking system was on the verge of collapse because of non-performing assets. Yet, we found a way to survive.

If India aspires to break into the world’s top two economies, it must gamble on its future again, for capital put at risk is what turns ideas into innovation and nations into powers.