What’s Holding India Back from Building Deep-Tech Unicorns: Challenges and Solutions

India has emerged as a global tech hub, boasting a thriving startup ecosystem with unicorns in fintech, edtech, and e-commerce. Yet, when it comes to deep-tech unicorns—startups leveraging cutting-edge technologies like artificial intelligence, biotechnology, or quantum computing—India lags behind giants like the US and China. The image of a packed conference hall from Outlook highlights the buzz around this topic, but the question remains: what’s holding India back, and how can it bridge the gap? Let’s break down the challenges and explore actionable solutions to propel India into the deep-tech race.

The Deep-Tech Gap: Why India Trails the US and China

The US and China have a significant head start in deep tech, thanks to decades of investment in foundational technology. Silicon Valley and Shenzhen are synonymous with innovation, producing companies like DeepMind and DJI. Meanwhile, India’s deep-tech ecosystem is still in its infancy. Here are the key reasons for this lag:

1. Limited Investment in Research and Development

Deep tech requires heavy investment in research and development (R&D), often with long gestation periods before profitability. In the US, companies like Google and government initiatives like DARPA pour billions into R&D annually. China’s state-backed programs, such as the Made in China 2025 initiative, similarly fuel innovation. In contrast, India’s R&D spending is a mere 0.7% of its GDP, compared to 2.8% in the US and 2.4% in China. This funding gap stifles the kind of groundbreaking research needed for deep-tech breakthroughs.

Stat Spotlight: India’s R&D expenditure is less than 1% of GDP, a stark contrast to global leaders.

2. Brain Drain and Talent Gaps

India produces some of the world’s best engineers and scientists, but many leave for opportunities abroad. The US, for instance, attracts top Indian talent to work at companies like NVIDIA or in academia at MIT. This brain drain means India loses the very minds capable of building deep-tech unicorns. Additionally, while India excels in software development, there’s a shortage of specialized skills in areas like quantum computing or synthetic biology, which are critical for deep tech.

3. Regulatory and Infrastructure Challenges

Deep tech often involves navigating complex regulatory landscapes, especially in fields like biotech or autonomous vehicles. India’s regulatory framework can be slow and fragmented, discouraging innovation. Moreover, the lack of advanced infrastructure, such as high-performance computing facilities or biotech labs, makes it harder for startups to experiment and scale. Compare this to China, where government-backed innovation hubs provide state-of-the-art resources to startups.

4. Risk-Averse Investment Culture

Indian investors tend to favor quick-return sectors like e-commerce or SaaS over deep tech, which requires patience and higher risk tolerance. Venture capital funding for deep tech in India was only $1.7 billion in 2023, compared to $40 billion in the US, according to a report by NASSCOM. Without sufficient funding, deep-tech startups struggle to survive the “valley of death”—the early stage where they burn cash without generating revenue.

Solutions to Build India’s Deep-Tech Ecosystem

The challenges are significant, but they’re not insurmountable. Here are four strategies to help India catch up and foster its own deep-tech unicorns:

1. Boost Government and Private R&D Investment

India needs to increase its R&D spending to at least 2% of GDP, with a focus on deep tech. The government can offer tax incentives, grants, and public-private partnerships to encourage innovation. For example, initiatives like the National Quantum Mission are a step in the right direction, but they need to be scaled up. Private companies, too, must step up—imagine if giants like TCS or Reliance invested heavily in AI or biotech research.

Actionable Step: Create a “Deep Tech Innovation Fund” to support early-stage startups with patient capital.

2. Retain and Upskill Talent

To curb brain drain, India must create an environment where talent can thrive. This means offering competitive salaries, access to cutting-edge projects, and a culture that celebrates innovation. Additionally, universities and institutes like the IITs should introduce specialized deep-tech programs in fields like AI, robotics, and genomics. Collaborations with global universities can also help upskill talent without losing them to emigration.

Success Story: Companies like Agnikul Cosmos, a Chennai-based space-tech startup, are proving that India can retain talent by working on ambitious projects like 3D-printed rocket engines.

3. Streamline Regulations and Build Infrastructure

The government should simplify regulatory processes for deep-tech startups, especially in sensitive areas like healthcare and defense. A single-window clearance system could reduce bureaucratic delays. Simultaneously, India needs to invest in infrastructure—think advanced AI computing clusters or biotech incubators. Public-private partnerships can make this a reality, ensuring startups have the tools they need to innovate.

4. Encourage Risk-Taking in the Investment Ecosystem

Investors need to shift their mindset toward long-term bets on deep tech. Government-backed venture funds can de-risk these investments by providing matching grants. Additionally, creating deep-tech-focused accelerators and incubators can nurture startups through their early stages. Highlighting success stories, like Bengaluru-based Qure.ai, which uses AI for medical diagnostics, can inspire more investors to take the plunge.

The Road Ahead: Can India Lead in Deep Tech?

India has all the ingredients to become a deep-tech powerhouse: a massive talent pool, a growing startup ecosystem, and a knack for frugal innovation. But to compete with the US and China, it must address its structural challenges head-on. By investing in R&D, retaining talent, improving infrastructure, and fostering a risk-taking culture, India can nurture the deep-tech unicorns of tomorrow. The conference hall in the Outlook image symbolizes the hunger for progress—let’s channel that energy into action.