What’s Holding India Back from Building Deep-Tech Unicorns

It is rare for a minister to admonish a public audience. And it is rarer still when that audience comprises members of an ecosystem whose success has been touted as its own making by the government.

And yet, the unthinkable happened when Union Minister of Commerce and Industry Piyush Goyal took the stage at last month’s Start-up Mahakumbh in New Delhi. The minister said that while India’s start-ups focus on food delivery and lifestyle products, its Chinese counterparts are advancing robotics and machine learning.

“Wealth creation in the short term may happen with some of these conveniences. But are we looking at 'dukaandari' [shopkeeping] or are we looking to compete globally with our innovations?” Goyal said.

The comment came as a surprise, with many seeing it as an unfair criticism of the third-largest start-up ecosystem, globally. To be sure, the government has been signalling its inclination for deep tech for some years now. Senior leaders have said the country requires a third tech revolution—after the first in IT services and the second with the rise of consumer internet platforms, such as Flipkart and Zomato.

Underpinning this is the anxiety that without self-reliance, India would be at the mercy of other countries at a time of crisis.

Diagnosing the Problem

“Strategic autonomy is something that the government needs to worry about. And when you look at strategic autonomy, tech autonomy is the centre of it. Unless you own your technologies, over a period of time you will face situations where countries don’t allow access to certain technologies,” says Ajai Chowdhry, cofounder, HCL.

It’s no secret that India relies heavily on imports of emerging technologies, especially semiconductors. According to a Lok Sabha reply in December 2024, the value of semiconductor chip imports stood at $20.7bn in financial year 2024, an 18.5% increase over the previous year. In financial year 2020, these imports were $10.1bn—indicating a doubling in four years.

A closer look at the deep tech landscape in India explains the dependence. Numbers from data intelligence platform Tracxn show that the US is home to over 26,000 deep-tech start-ups, China to 6,400, followed by India with 5,700.

As many as 43% and 45% of these companies in the US and China, respectively, were founded before 2015, while only 24% of deep-tech start-ups in India were operational 10 years ago, indicating that the US and China started working on foundational technology long before India.

In terms of funding, Tracxn data shows that India’s deep-tech start-ups have raised $7.64bn in venture capital (VC) and private funding since 2015. This number for China is $72bn and $402bn for the US.

Slow to Innovate

There is yet another area where India lags: patent filings. Data from the Department for Promotion of Industry and Internal Trade (DPIIT) shows that most start-ups have filed few to no patents, barring a handful of exceptions such as Ather Energy and Ola Electric.

The 2023 World Intellectual Property Indicators Report highlights this disparity in the global patent race: China led with 1.64mn filings, the US followed with 5,18,364, and India ranked sixth with 64,480 filings.

“We secured a patent in the US for our AI-driven solution, but in India, it’s still under review. People often ask, ‘Why patent an algorithm? It’s just a piece of code.’ In the US, software patents are more accepted, as they understand that patents don’t always need a physical product,” says Pramod Gummaraj, founder and chief executive of Aprecomm, a network intelligence company.

The difference in patenting attitudes is clear. In the US, software and algorithm patents are routinely granted, unlike in India.

Yet, optimism remains. Sunil Shekhawat, chief executive of SanchiConnect, a platform that helps deep-tech start-ups acquire funding, believes things are improving. “Today, there’s a lot of support—government subsidies, patent attorneys at incubation centres and university resources. If someone is still struggling, it’s likely due to a lack of awareness or not following the right steps,” he says.

Passing the Buck

The reasons for India’s slow progress in deep tech innovation despite a booming start-up ecosystem varies depending on which side of the fence one occupies. Start-ups say VCs shy away from funding them, VCs point to the government for lack of spending on R&D, while the government argues for greater participation of the private sector.

In the past 10 years, only 44% of deep-tech start-ups in India could raise funding compared to 81% in China and 82% in the US, Tracxn data shows. The average amount of funding also declined from a peak of $8.4mn in 2022 to $4.2mn in 2024.

Then there is the government’s dismal spending on R&D. Though gross expenditure on research & development (GERD) has doubled in absolute terms from Rs 60,196 crore in financial year 2011 to Rs 1,27,381 crore in 2021, it has declined in percentage share of GDP from 0.8% to 0.6% in the same period.

But the government says it is the private sector that needs to step on the gas in R&D. In many economies, participation of the private sector in GERD exceeds 50%. For countries such as China, Japan, South Korea and the US, this share crosses 70%. In India, it was 41% in 2020, according to a report by the Ministry of Science and Technology.

However, things are not all bleak. Experts agree that India now presents a far broader market for deep tech products than a decade ago. “Every country is different. Every place is different and entrepreneurs are also different. So, whatever it is, we have to find our own way,” says Mohan Jindal, founder and chief executive of Chipspirit, a semiconductor services start-up.

What stands out now is the urgent need for a collective transformation—an overhaul that spans government, academia, start-ups and the private sector.