Whalesbook
Defence Tech Ascends
Defence technology has emerged as India's next major deeptech frontier by late 2025, a dramatic shift catalyzed by events like Operation Sindoor. This operation underscored the nation's reliance on imported defence equipment and urgently highlighted the need for robust indigenous capabilities, particularly in drones, anti-drone systems, and AI-driven weaponry.
Government Mandate
The push for technological sovereignty is now paramount. "Before Op Sindoor, tech sovereignty efforts were scattered. Today, indigenisation is the clear focus, especially after recent supply chain challenges," notes Sai Pattabiram, founder of Zuppa. This governmental imperative has translated into increased demand for homegrown drone startups and heightened interest from Indian venture capital firms.
Funding Surge
Defence tech startups secured approximately $68 million in 2025, a substantial portion of the $78 million raised over the past decade and representing about 13% of total Indian deeptech startup funding. While dronetech forms a significant part, other areas like ammunition and AI-enabled systems are also gaining traction.
Procurement Power
The Defence Acquisition Council cleared 193 capital procurement contracts worth INR 2.09 Lakh Crore in FY25. Crucially, 177 of these, valued at INR 1.7 Lakh Crore (81%), were awarded to domestic industry, marking a decisive turn towards self-reliance.
De-risking Innovation
The government is actively lowering entry barriers. Startups benefit from subsidized land, shared infrastructure, and common testing facilities, shifting early-stage technical and financial risks away from private capital. Schemes like iDEX and Make-I/Make-II, along with the Defence Testing Infrastructure Scheme, provide essential funding and a clear procurement pathway.
VC Receptiveness
Investors like Bluehill.VC recognize the government's role as the primary capital source. SIDBI's Fund of Funds, with a significant allocation towards deeptech, and an upcoming INR 1 Lakh Crore RDI fund, are creating predictable revenue streams. This environment enables early-stage investors to find liquidity through secondaries, a rarity in deeptech previously.
Evaluating Core IP
Sophisticated defense buyers and investors now scrutinize core, defensible intellectual property, focusing on patents, certifications, and embedded systems rather than just surface-level products. "Investors are looking beyond the flying object and focusing on what's inside it," Pattabiram explains.
Market Certainty
The global demand for defence equipment from startups, spanning major defense budgets, is growing. The Indian government's proposition of "Come to us with a strong technology, and we will fund it" fundamentally alters the risk-reward equation for deeptech investment, shifting focus from anticipating demand to fulfilling pre-defined market needs.
Future Horizon
Defence tech is poised to lead deeptech funding for the next few years, expanding into electronic warfare, secure communications, AI-led surveillance, and space assets. With long-term allocations and indigenisation as strategic imperatives, the sector offers strong revenue visibility, attracting sustained capital and fostering maturity.