Beyond conflict-driven urgency, there’s a strong policy push and increasing government support with initiatives like Atmanirbhar Bharat and Make in India programs that have attracted a lot of strategic investments
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VIJAY SONEJI
As India ramps up efforts to become self-reliant in defence, start-ups in the defence tech sector are seeing a rising interest from investors. According to data from Tracxn, since 2019, these start-ups have raised a total of $349 million across 91 equity funding rounds.
Geopolitics, policy push and innovation fuel this growth. The use of drones in global conflicts coupled with rising geopolitical tensions has highlighted a need for developing cost-effective, more responsive Indigenous defence technology. “For countries like India, which are still building out fifth-generation capabilities and whose defence budgets are significantly smaller than global powers, technologies like drones offer scalable and indigenous alternatives,” said Abhishek Prasad, Managing Partner at Cornerstone Ventures.
Beyond conflict-driven urgency, there’s a strong policy push and increasing government support with initiatives like Atmanirbhar Bharat and Make in India programs that have attracted a lot of strategic investments. “As of February 2025, these efforts have led to the signing of over 253 Memorandums of Understanding (MoUs), attracting potential investments worth ₹53,439 crore. Additionally, the Defence Production and Export Promotion Policy (DPEPP 2020) aims to double defence production and increase exports by 2025, creating opportunities for start-ups,” said Neha Singh Co-Founder of Tracxn.
Parameters for investments
Defence-tech start-ups demand long-term investments and require longer gestational periods and deeper technical engagements.
Investors prioritise start-ups with strong technical depth, a focused USP and the ability to scale across mission-critical use cases. This also includes regulatory readiness, adaptable and modular technology, and the ability to collaborate with larger defence primes, who still receive a bulk of the procurement budgets.
“IP ownership is important, but more than that, we assess whether the technology can evolve in a rapidly changing ecosystem. Defence needs shift fast—today it’s surveillance, tomorrow it could be kamikaze or payload delivery. So we focus on core technology that is modular and adaptable. Regulatory readiness is also critical, as is the ability to collaborate with larger defence primes, since a majority of the procurement budget still flows to bigger players,” said Prasad.
Start-ups in this sector have to focus on deep R&D and platform-level capabilities rather than spreading thin or chasing one-off contracts to gain a competitive edge over the legacy players.
Emerging trends
“Investors are showing growing interest in dual-use technologies with both military and civilian applications, such as autonomous drones, AI surveillance systems, underwater drones, and hyperspectral satellites,” Singh stated.
Chintan Antani, VP, Seed & Acceleration at IIMA Ventures said, “ Ancillary spaces to these products and technologies may also pick up. This includes propulsion technologies (aerospace/spacetech), technical textiles semiconductor applications, laser technologies and many more.”
There is a growing demand for offensive capabilities like payload delivery, suicide drones, and mission-autonomous systems. This also leaves room for collaboration. “ We expect to see more collaborations—between start-ups and large OEMs, and between different start-ups, that bring complementary capabilities. Going forward, the most successful defence-tech players in India will be those that focus on building foundational capabilities that power a wider ecosystem—whether that’s in communication, control systems or AI-driven autonomy,” Prasad added.
(With inputs from businessline intern Nethra Sailesh)
Published on May 11, 2025
