The government’s move to formally define deep-tech startups and extend their recognition period to 20 years, addresses a long-standing policy gap for companies with extended product development timelines, according to venture capital investors.
The revised framework, notified by the Department for Promotion of Industry and Internal Trade (DPIIT), last week has expanded the definition of startups to include deep-tech as a sub-category, has raised the turnover cap to Rs 300 crore, and lengthened the recognition window from 10 years. Investors said the changes better reflect the realities of science-led businesses, which often spend more than a decade on research, testing and intellectual property creation before reaching commercial scale.
Despite the policy shift, most investors said the revised definition is unlikely to immediately alter private investment behaviour, which continues to be driven by technology depth, execution capability and founder quality rather than regulatory timelines.
Why 10 Years Wasn’t Enough
Sateesh Andra, founder and managing director of early-stage venture capital firm Endiya Partners, said the earlier 10-year framework often expired before deep-tech companies became commercially viable. “Deep-tech companies were losing startup status just as they approached commercial viability,” he said.
According to Andra, extending the recognition period allows founders to access tax benefits, grants and regulatory support across the full development life-cycle rather than only during early-stage research. This, he added, makes Indian deep-tech ventures structurally more comparable with global hubs such as Boston, Tel Aviv and Singapore.
Other investors said the revised definition could improve access to government grants and procurement pathways, though it does not change how firms assess investment risk. Manish Gupta, general partner at growX ventures, said his firm’s evaluation framework remains anchored in technology depth rather than policy incentives. “The extended recognition period is meaningful from an ecosystem standpoint,” he said, “because it expands the state’s capacity to participate in deep tech risk capital.”
From Policy to Portfolios
Early-stage investor Amit Chand of BYT Capital said the framework improves how risk is priced rather than increasing investor appetite. “It reduces non-technical risk and improves confidence among downstream investors,” he said, particularly by easing pressure on founders to commercialise prematurely.
Investors also downplayed the near-term impact of the three-year tax holiday under Section 80-IAC, noting that most deep-tech firms remain pre-revenue or loss-making for extended periods. “The tax holiday is not a decisive factor,” said Vishesh Rajaram, founding partner at Speciale Invest. “Where the revised definition matters more is in ecosystem coordination, eligibility for grants, continuity in government engagement, procurement pathways, and confidence for long-term capital providers.”
Overall, investors said the primary value of the framework lies in reducing regulatory ambiguity by clearly distinguishing frontier technology companies from incremental innovation, a shift they expect to support late-stage funding and long-term institutional capital over time.
