India’s Deep Tech Fund Of Funds (2025): Catalyzing Innovation In Emerging Technologies – IMPRI Impact And Policy Research Institute

Policy Update
Omkar Shelar

Introduction

The Indian government launched a ₹10,000 crore Fund of Funds in Union Budget 2025 to concentrate on deep-tech startups as part of its mission to enhance sectors including artificial intelligence (AI), quantum computing, biotechnology and semiconductors. This program seeks to establish India as a worldwide frontier technology leader through the provision of initial stage funding and innovation networks development. 

Objectives

1. The fund’s aim is to  invest capital specifically during early development stages of technological businesses working with high-risk fields including AI, biotech and quantum computing.
2. Development of frontier technology  within the country to decrease imports and build technological independence.
3. To draw private business investments into deep-tech startups the government should create incentives combined with risk reduction for venture capital participation.
4. An innovation ecosystem should be built by connecting academia with startups and industry partners to drive commercialization and generate high-level job positions.

Source : Prepared by author

Functions of the Deep Tech Fund of Funds

The Deep Tech FoF operates as a funds channel to invest in Alternative Investment Funds which provide capital to deep-tech startup operations. The FoF serves as a fund aggregator that reduces investment risks while attracting private investors to risky but lucrative sectors. The fund intends to allocate its investments towards funding programs in AI together with machine learning and robotics and advanced manufacturing. 

Performance and Early Indicators

1. As a new initiative, the FoF has received  ₹10,000 crore financial support from the government. This budget investment forms part of India’s strategy to improve its position in future technology sectors alongside its goal to drive economic development through innovative start-ups. 
2. The Deep Tech Fund of Funds (FoF) shows strong growth potential in its early development phase through various promising indicators of its future performance structure. The government assigns significant parts from the ₹10,000 crore corpus specifically to finance deep-tech sectors including artificial intelligence, machine learning, quantum computing, advanced materials, semiconductors and biotechnology.  By setting aside specific funds, the government shows it understands that new technologies can help both the economy grow and improve national security.
3. The fund stands ready to collaborate with current initiatives under three programs including National Deep Tech Startup Policy (NDTSP) and Digital India goals and IndiaAI Mission. The Deep Tech FoF works together with the India Semiconductor Mission and Startup India to be the essential solution that fills the financing gap for startups during early development and growth phases.
4. The government uses its initiatives to support Alternative Investment Funds (AIFs) and venture capital funds to achieve parallel resource contributions from private investors and public funding sources. The deployment strategies are currently under development through ongoing discussions between government stakeholders and deep-tech incubators along with industry associations to find effective risk-balanced financial solutions. 
5. The actual fund distribution remains at a starting point yet the solid government support together with defined program sectors create positive future disbursement expectations. The fund creates both immediate economic advantages such as job growth and industrial superiority and long-term benefits by reinforcing intellectual properties and supporting vital industry sectors.

Source : Prepared by author

Global Comparisons

Deep-tech activities in the United States thrive because the nation integrates private investment with extensive state-sponsored initiatives. The Defense Advanced Research Projects Agency (DARPA) together with the National Science Foundation (NSF) allocates major funds for highly advanced research development within artificial intelligence and quantum computing and biotechnology domains. Deep-tech startup financing comes from both private venture capital firms and corporate investors who increase innovation and growth across these sectors.

The European Union displays strong interest in deep-tech startups because they acquired €15.1 billion in venture capital funding during 2024 while surpassing other industry funding levels. Deep-tech innovation in Germany and France receives government support through national funding partnerships and joint initiatives between public bodies and private businesses that build a powerful innovation environment across the nations.

The deep-tech field in Israel stands globally known for its exceptional innovation capabilities within cybersecurity and biotechnology as well as artificial intelligence research. With Yozma 2.0 the government introduced a fund to draw institutional investors toward supporting high-tech startup businesses. An initiative demonstrates how Israeli public-private partnerships advance deep technology growth and allows Israel to maintain its position as a global leader in hi-tech commercialization. 

Source : Prepared by author

Challenges

Execution and Oversight

Solid governance systems must exist to achieve effective Fund of Funds (FoF) deployment while maintaining proper use of funds and efficiency. The absence of clear oversight mechanisms creates a risk of fund mismanagement together with corruption that would compromise the fund’s success. The government needs to establish clear monitoring procedures alongside transparent frameworks to track investments until the funds reach startup businesses in their highest need and ensure their usage remains bounded within expected purposes.

Private Sector Participation 

Deep technology businesses face significant risks because they demand extended durations before gaining returns on their investments. Private investors find it difficult to participate in such ventures because they worry about profitability during evaluations. The government must establish systems to lower investment risks through co-investing arrangements and tax breaks and low-interest loans to draw more private sector investment.

Infrastructure and Talent

India needs better development of its advanced infrastructure including state-of-the-art laboratories and manufacturing capabilities and research facilities to support deep-tech industry development across nations. A major requirement for deep-tech innovation includes hiring workers with specialized competencies such as expertise in AI robotics along with quantum computing expertise. The educational system and training programs in India must change quickly to develop appropriate talent for upcoming positions.

Source : Prepared by author

Policy Recommendations 

Enhanced Collaboration

The successful advancement of deep-tech innovation depends on tighter alliances between public institutions operating together with academic organizations and private businesses. Research institutions together with startups can join their efforts to convert theoretical science into functional applications. The formation of such partnerships enables the ecosystem to gain foreign investments and also enables technology transfers that strengthen its operation. New research development benefits from market alignment as well as technology scaling toward practical uses when industry and academic entities collaborate.

Incentives for Investors

The government should establish tax breaks alongside several financial incentives to stimulate private sector investment levels. In order to promote investments, government officials should introduce programs that grant tax relief and cheap loans coupled with split-risk financing with investors. New regulatory conventions that support technological development together with investor security systems will encourage deeper private sector participation in deep-tech markets.

Focus on Education and Training

To develop skilled professionals for deep-tech sectors India must dedicate appropriate financial resources to create modern education programs and technical training programs. Curriculums of universities must connect their education with industrial specifications particularly in technological areas like Artificial Intelligence along with quantum computing and advanced manufacturing. Training collaborations that unite theoretical learning with real-world deep-tech practice efforts will help close skill gaps while generating suitable talents to push innovation progress. Global partnerships between Indian institutions and industry leaders and international universities will allow India to monitor latest technological developments from around the world. 

Conclusion

India uses a ₹10,000 crore Deep Tech Fund of Funds as a strategic instrument to fuel innovation and achieve leadership standing in emerging technologies. Through this initiative India can boost deep-tech advances particularly in biotechnology and quantum computing alongside artificial intelligence to become a strong global force in emerging technology fields.

References

1. Ghosh, S. (2024, April 4). Deep tech as an infinite game: A policy imperative for India’s technological future. Observer Research Foundation. https://www.orfonline.org/expert-speak/deep-tech-as-an-infinite-game-a-policy-imperative-for-india-s-technological-future
2. Entrepreneur India. (2024, April 9). Govt to prioritise new-age tech and AI startups under INR 10,000 Cr fund of funds scheme. Entrepreneur India. https://www.entrepreneur.com/en-in/news-and-trends/govt-to-prioritise-new-age-tech-and-ai-startups-under-inr/490023
3. Reuters. (2024, April 21). Israel launches fund to entice institutional investment in tech firms. Reuters. https://www.reuters.com/markets/israel-launches-fund-entice-institutional-investment-tech-firms-2024-04-21/
4. The Economic Times. (2024, April 2). Govt announces host of measures for startups; new Fund of Funds scheme with Rs 10K cr corpus. The Economic Times. https://legal.economictimes.indiatimes.com/news/law-policy/govt-announces-host-of-measures-for-startups-new-fund-of-funds-scheme-with-rs-10k-cr-corpus/117835923

About the Contributor: Omkar Shelar is a policy researcher at IMPRI and a postgraduate student of Public Policy and Governance at the Tata Institute of Social Sciences, Hyderabad with a keen interest in Data driven policy making and analysis. 

Acknowledgement: The author extends sincere gratitude to Dr Arjun Kumar and Aasthaba Jadeja for their invaluable guidance and support.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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