India’s deep tech ecosystem is at a pivotal moment. Startups are not just building apps, but pushing the frontiers of AI, semiconductors, edge computing, quantum security, and dual-use technologies. Yet, mere innovation won’t assure them success, which seeks patient capital, policy foresight, and an enabling ecosystem.
While Bengaluru has long been India’s startup capital, Hyderabad, fuelled by institutions like T-Hub, is emerging as an alternative pivot for the deep tech sector. Bengaluru’s market-led capital magnetism is facing a challenge from Hyderabad’s institution-backed incubation.
According to data by Traxcn, deep tech companies in Bengaluru have raised $345 million in equity funding over 70 rounds, this year until September. In comparison, during the same period last year, these companies raised $231 million across 101 rounds. Thus, Bengaluru’s deep tech firms this year saw a 49.09% increase in funding, compared to 2024.
In contrast, the sector in Hyderabad has received over $480 million in total funding over the last 10 years, with the year 2024 accounting for the highest amount raised at over $159 million. So far in 2025, funding has reached $36.3 million, Traxcn’s data showed.
Patience vs Speed
Karthikeyan Madathil, partner at Yali Capital, rejects the idea that Bengaluru lacks patience. The venture capital (VC) ecosystem in the ‘silicon valley of India’ is experienced and evolving, he said, adding that firms like Yali Capital are now backing technically complex ventures.
Madathil said that deep-tech-focused VCs are familiar with the needs of firms in the sector, having experience in operating, as well as investing in such companies. “Therefore, it would be incorrect to say that Bangalore VCs lack patience and institutional support.”
However, he admits that the sector demands a different financial temperament, not gross merchandise value (GMV), not blitz-scaling, but long-gestation endurance. The challenge in India, he noted, isn’t seed money but growth capital.
Vishnu Das, principal at Celesta Capital, pointed out the gap in India’s capital stack.
“At the seed stage, plenty will write $500K to $3M cheques. But if you want to build a global deep tech product, you need a $20-25 million R&D cheque, that’s where there is a complete blank space in India,” he said.
Even as VCs grow enthusiastic about AI and chips, very few in India are willing to underwrite global ambition.
Institutional Scaffolding for Deep Tech
Hyderabad’s rise in deep tech is driven largely by one institution, T-Hub. Mayank Chawla, founder of the deep tech startup Neurowand.ai, credits T-Hub for enabling their recognition and scale.
“Our journey started through the T-Hub fund. They connected us to defence, DSS, and industry bodies. Without those connections, building a defence-focused AI company would have taken years.”
Unlike Bengaluru’s market-first ecosystem, Hyderabad leans on state-backed orchestration, access to mentors, international delegations, policy linkages, and even defence corridors. It offers something private capital cannot, which is legitimacy.
Madathil said that an institution like T-Hub is a boon for a city trying to bootstrap a deep-tech ecosystem, and has enabled some successful firms. “Yali Capital has invested in one such company and will continue to look at others seeded out of there,” he added.
This institutional nurturing, Chawla argues, is critical for sectors like quantum, edge AI, and dual-use defence technologies, where trust and compliance outweigh speed.
Despite Hyderabad’s institutional momentum, Bengaluru retains a deeper reservoir of technical talent and research heritage, from IISc to C-CAMP, to corporate R&D hubs.
“Bengaluru has incubators like NSRCEL [Incubation Centre for Startups & Entrepreneurs], C-CAMP, accelerators, co-working spaces, prototyping infrastructure, a manufacturing ecosystem, access to mentors, abundant talent in deep-tech, and a history of deep-tech innovation,” said Madathil.
The city is not short of capital or ambition, but of state integration. Das said that the missing link isn’t money, “it is the government’s ability to fast-track startup products into its own ecosystem. Once validated, if governments become reliable consumers, the whole deep tech chain accelerates.”
Without this, Indian deep tech founders spend years proving industrial viability before commercial scale. Neurowand.ai, which operates at the confluence of edge AI and quantum cryptography, highlights another acute friction, data access and regulation.
Their approach, optimising LLMs and transformer stacks for offline, on-premise usage, places them in the high-stakes deep tech zone, where accuracy, privacy, and speed are non-negotiable. Defence is their proving ground; dual-use markets like aviation, banking and mining are their commercial frontier.
Hyderabad’s cost advantage and institutional backing help, but global visibility and large sovereign customers remain concentrated in Bengaluru, Delhi, and international markets.
Policy and Perception
Madathil acknowledges that both states have taken different policy routes, and neither is lagging. “Karnataka and Bengaluru have been pioneers in the tech and startup sector, and government policy has played a significant positive role. Telangana, on the other hand, has been successful in bootstrapping a tech ecosystem in a relatively short time,” he said.
The divergence lies in policy framing. Telangana’s model is more visible and front-facing, funnelling engagements through T-Hub, TSIC, and state cohorts. Karnataka’s approach is market-led, grounded in institutions and private capital, relying on firms to chart their own path.
The missing milestone in India’s deep tech journey is firms’ transformation into global businesses.
“Everyone is funding ideas, hoping they’ll fund themselves into a global product. That does not work. Founders need capital in the bank to hire the best and sell globally,” said Das.
He is blunt about the risk India must embrace. “Out of 10 deep tech R&D bets, nine may fail. That has to be acceptable. We need policy and funding frameworks that allow failure, not punish it.”
Without this mindset, India risks building application startups while missing the hard science revolution. While Hyderabad is supplying the structure, Bengaluru is supplying scale. But India’s deep tech movement will only thrive when both capital and state converge to support long-gestation, high-stakes innovation.
The next decade of Indian innovation will not be defined by apps, but by algorithms, microchips, quantum security, robotics, and sovereign computing infrastructure.
As Madathil noted, “Both states are examples of successful models in developing tech ecosystems.” The future lies in federation, not rivalry.
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