Startup funding market in India is becoming more selective, with investors showing greater interest in businesses that can build strong technology and generate long-term value. IdeaBaaz co-founder Mudit Kumar expects the next major growth cycle to come from deeptech areas such as physical AI, robotics, drones, semiconductors and clean energy in India.
Kumar said startups are increasingly becoming part of the core investment plans of family offices and high-net-worth individuals (HNIs). According to him, investors are now looking beyond short-term transactions and are willing to provide patient capital to businesses that can develop defensible technology.
This change is also visible in funding data. Deeptech startups in India have attracted nearly $11.4 billion in private equity and venture capital funding since 2015, with more than 85% of this amount coming in the last six years.
Deeptech Attracts Capital
Kumar said almost every sector has room for innovation, but investor attention is moving towards technologies that could shape the next phase of economic growth. He sees opportunities in space technology, robotics, semiconductors, clean technology and clean energy.
Deeptech startups raised about $2.96 billion across 189 deals in 2025, even as overall startup funding remained under pressure. In 2026 so far, the sector has attracted nearly $1 billion across 103 funding rounds, according to the data cited by Kumar.
AI and generative AI account for about $2.88 billion in cumulative deeptech funding. Semiconductors and spacetech are also emerging as fast-growing segments, with cumulative funding of around $620 million and $658 million, respectively.
Physical AI Gains Ground
Kumar believes physical AI is becoming relevant even in a manpower-intensive economy such as India. He pointed to the rapid use of AI tools such as ChatGPT and Claude among students, professionals and senior business executives as evidence of a broader shift in everyday work.
He said physical AI, robotics and drones could create opportunities across defence, manufacturing and logistics. In his view, these technologies can also contribute to building domestic capabilities in areas that have strategic importance.
Drone and anti-drone technology, in particular, has become an important part of defence technology. Kumar said such systems contribute directly to national security and sovereignty, with innovation in these areas receiving greater attention.
Policy Supports Innovation
The rise of deeptech is also taking place alongside government efforts to increase research and technology development. The Research, Development and Innovation Fund, launched in November 2025 with a corpus of Rs 1 lakh crore, has cleared Rs 2,192 crore in soft loans for 22 private companies.
The supported companies are working across areas including space systems, energy storage, semiconductors and robotics. Such funding is intended to support technology development that may require longer periods before reaching commercial scale.
The physical AI ecosystem is also attracting private capital. Startups in this segment have raised around $155 million through about 31 deals in 2026 so far. The broader physical AI systems market is projected to become a more than $100 billion opportunity by 2030.
Startups Need Flexibility
Kumar said the rapid pace of AI development creates a challenge for founders as well as investors. Technologies and solutions can change within months, making it important for businesses to build products that can adapt to new developments.
He said startups should remain flexible because solutions developed today may need to work with newer technologies over the next one or two years. This becomes particularly important for companies seeking larger rounds of funding.
Later-stage capital is already concentrated among a smaller number of startups. Series C and later rounds account for only about 7% of transactions but represent nearly 35% of total investment, highlighting the importance of commercial traction and scalable technology.
Top AI Startups in India
India has a growing group of AI startups working across enterprise software, generative AI, robotics, healthcare, financial technology and other sectors. While software-led AI continues to attract significant funding, physical AI is creating another area of interest by connecting artificial intelligence with machines and real-world environments.
Kumar expects the next five years to favour deeptech founders who can combine defensible technology with clear revenue opportunities. Deeptech share of domestic VC and PE activity has risen from 4% in 2016 to 15% in 2025, indicating that the sector is moving from early experimentation towards larger-scale commercial opportunities.
