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Long-cycle innovation in AI, semiconductors, defence, space and advanced manufacturing calls for patient capital and new investment models

Mumbai, July 19: As India’s deep-tech ecosystem enters its next phase of growth, traditional venture capital models built around rapid scaling and quick exits are becoming increasingly incompatible with the realities of science-led innovation, according to Equirus InnovateX Fund.

India’s deep-tech ecosystem has witnessed significant momentum in recent years, attracting over US$28 billion in investments since 2016. However, unlike software-led businesses, deep-tech companies often spend years validating technologies, developing intellectual property, navigating regulatory approvals and establishing manufacturing capabilities before achieving commercial scale.

According to Agarwal, forcing such businesses into conventional five-to-seven-year venture capital cycles can lead to premature scaling, short-term decision-making and erosion of long-term competitive advantage.

The changing nature of innovation is also reshaping investor behaviour globally. Institutional investors with longer investment horizons including sovereign wealth funds, family offices and university endowments are showing greater willingness to back deep-tech focused funds that prioritise technology compounding over rapid mark-ups.

Venture funds are also adopting more flexible investment structures such as continuation vehicles, evergreen funds and blended capital pools that enable longer holding periods while maintaining portfolio discipline. Additionally, strategic corporate investors are playing an increasingly important role by providing domain expertise, commercial partnerships and market validation alongside capital.

India’s policy ecosystem is further strengthening investor confidence through initiatives such as the Research Development and Innovation (RDI) Fund, IN-SPACe, iDEX, Make in India, and defence modernisation programmes, which are accelerating private investment into strategic technology sectors.

Several venture investors are already redesigning their portfolio strategies by balancing long-horizon deep-tech investments with businesses that have relatively shorter commercialisation cycles, enabling funds to manage liquidity while continuing to support breakthrough innovation.