TL;DR: NITI Aayog member V.K. Saraswat has issued a stern reminder to India’s venture capital community: deeptech and defence cannot wait for 3-year exit cycles. As India pushes for 'Atmanirbhar' defence, the lack of private risk capital in hardware remains the single biggest bottleneck to sovereign security.
Vichaarak Perspective
The Indian VC model is fundamentally broken for anything that doesn’t run on a browser or an app. For a decade, capital has chased the 'easy' problems—grocery delivery, fintech arbitrage, and edtech sales machines. Defence tech, meanwhile, requires "patient capital" that understands long gestation periods, rigorous field trials, and the 'monopsony' risk of having the government as the only buyer.
The contrarian view? We don’t just need more capital; we need a different kind of capitalist. The current crop of MBA-led funds is trained to look for LTV/CAC ratios that simply don't exist in the world of missile guidance systems or underwater drones. If private capital doesn't pivot, the Indian defence startup ecosystem will remain a 'grant-fed' laboratory rather than a 'market-led' industry. Sovereign security is too important to be left to the whims of the next "quick commerce" hype cycle.
FAQ: Defence Tech Investing
Q: Why do VCs avoid defence startups? A: Long sales cycles, heavy capital expenditure, and the regulatory complexity of dealing with the Ministry of Defence.
Q: Is there any change in the exit environment? A: Yes, the recent trend of SME IPOs and increasing defence procurement budgets are creating clearer liquidity paths for early investors.
Q: What is the 'Sovereign Innovation' argument? A: It's the belief that domestic production of critical tech is not just an economic goal, but a national security necessity that justifies premium valuations.
NITI Aayog | Department of Defence Production | Deeptech India