India's defence sector is undergoing a transformative shift, moving from decades of import dependency towards a self-reliant ecosystem driven by innovation and indigenous capabilities. This transformation is anchored in the strategic vision of Atmanirbhar Bharat (Self-Reliant India), which recognizes defence manufacturing as a critical pillar of national security and economic growth.

The emergence of defence startups represents a paradigm shift in India's approach to military modernization. Traditionally dominated by public sector undertakings (PSUs) and foreign vendors, the sector is now witnessing the rise of agile, technology-driven startups that are addressing critical capability gaps through indigenous innovation.

Geopolitical Imperatives

Evolving security challenges, particularly along India's northern borders, have highlighted the strategic vulnerability of import dependency.

Technological Disruption

Emerging technologies like artificial intelligence, unmanned systems, and space-based assets are reshaping modern warfare.

Economic Opportunity

The defence sector presents a significant opportunity for job creation, export growth, and technological advancement.

Strategic Autonomy

Self-reliance in defence is essential for India's strategic autonomy and global positioning.

Government Commitment

The government's commitment to this transformation is evident in its ambitious targets:

• Increasing defence manufacturing turnover to ₹1.75 lakh crore by 2025
• Growing defence exports from ₹23,622 crore in 2024-25 to ₹50,000 crore by 2029
• Reducing import dependency across critical technology domains
• Positioning India as a global hub for defence innovation and manufacturing

The Indian government has implemented a series of strategic initiatives to foster innovation and self-reliance in the defence sector. These policies and programs have created an enabling environment for startups to enter and thrive in what was traditionally a closed ecosystem.

Key Policy Frameworks

Defence Acquisition Procedure (DAP) 2020

• Prioritizes indigenous design, development, and manufacturing
• Introduces new procurement categories favoring Indian vendors
• Explicitly encourages startup participation in procurement processes
• Streamlines trial procedures and introduces leasing as an acquisition option

Defence Production and Export Promotion Policy (DPEPP)

• Sets ambitious targets for defence production and exports
• Outlines framework for reducing import dependency
• Creates mechanisms for technology development and innovation
• Establishes roadmap for enhancing competitiveness of domestic industry

Positive Indigenisation Lists

• The government has banned the import of over 500 weapon systems and sub-systems
• Creates a pipeline of demand that local startups can address through modular innovations
• Provides visibility and certainty for investment in indigenous capabilities
• Progressively expands to cover more complex systems and technologies

Flagship Programs

Innovations for Defence Excellence (iDEX)

• Launched by the Ministry of Defence in 2018
• Offers startups up to ₹1.5 crore in grant funding per project
• Engages over 300 startups across more than 250 challenges
• Provides direct access to military users and requirements

Defence Innovation Organisation (DIO)

• Not-for-profit company to oversee defence innovation initiatives
• Manages the iDEX program and Defence Innovation Fund
• Has disbursed more than ₹350 crore in grants to startups
• Creates linkages between innovators, accelerators, and end-users

India's defence startup ecosystem comprises a diverse range of players, from innovative startups and specialized incubators to established industry collaborators. This section highlights the key entities driving innovation and transformation in this space.

Startup Landscape

The Indian defence startup landscape has grown significantly, with over 1,000 startups now operating in this sector. These companies span various technology domains and stages of development:

By Technology Domain

• Unmanned Systems: Companies developing drones, autonomous ground vehicles, and underwater systems
• Electronics and Sensors: Startups focused on surveillance, imaging, and electronic warfare solutions
• Cybersecurity and AI: Firms developing secure communications, encryption, and AI-powered analytics
• Space Technology: Companies working on satellite systems, launch vehicles, and space-based services
• Advanced Materials: Startups developing specialized materials for defense applications

Incubators and Accelerators

A network of specialized incubators and accelerators has emerged to support defence startups:

Defence-Focused Incubators

• Society for Innovation and Development (SID) at IISc Bangalore: Supports deep-tech startups with defence applications
• Forge Accelerator: Specializes in hardware startups with defence and aerospace focus
• SIDBI and SINE IIT-Bombay: Launched special funds and incubators targeting defence innovation

Industry Collaborators

Established industry players are increasingly engaging with startups through various collaboration models:

Defence Public Sector Undertakings (DPSUs)

• Hindustan Aeronautics Limited (HAL): Partnering with startups on avionics and unmanned systems
• Bharat Electronics Limited (BEL): Collaborating on electronics, sensors, and AI applications
• Bharat Dynamics Limited (BDL): Working with startups on missile technologies

The funding landscape for Indian defence startups has evolved significantly, though it continues to present unique challenges compared to other technology sectors. This section examines the current state of funding, key sources of capital, persistent challenges, and emerging trends.

Current State of Funding

The Indian defence tech ecosystem has witnessed growing investment interest, with several notable trends:

• According to a NASSCOM-BCG report, the Indian deeptech ecosystem attracted $2.7 billion in funding between 2018–2022, with 10–12% allocated to sectors aligned with defence applications
• Defence startups raised approximately ₹850 crore in venture funding in 2024, a 35% increase from the previous year
• Early-stage funding (seed and Series A) dominates the landscape, with fewer growth-stage deals

Key Funding Sources

Government Funding

• Defence Innovation Organisation (DIO) and iDEX: Disbursed more than ₹350 crore in grants to startups
• Technology Development Fund (TDF): DRDO-managed fund supporting technology development
• IN-SPACe and iDEX Prime: Higher-ticket projects (₹10 crore and above) for mature ventures

Venture Capital

• Specialized Defence Funds: MountTech Growth Fund (₹250 crore), iDEX Fund, SIDBI Fund of Funds
• Technology-Focused VCs: Qualcomm Ventures, Celesta Capital, Florintree Advisors, WRV Capital

Funding Challenges

Structural Challenges

• Long Sales Cycles: Defence procurement timelines can extend to years, creating cash flow challenges
• Regulatory Complexity: Export controls and security clearances complicate investment processes
• Valuation Challenges: Difficulty in valuing defence IP and technology due to specialized nature

India's defence startup ecosystem is driving innovation across multiple technology domains, addressing critical capability gaps and creating indigenous alternatives to imported systems. This section explores the key technological focus areas where startups are making significant contributions.

Unmanned Systems and Drones

Military Drones and UAVs

• Border Surveillance and Reconnaissance: Companies like ideaForge supply the Indian army with UAVs for border surveillance and high-altitude transport
• Combat Drones: The recent conflicts (Armenia-Azerbaijan, Russia-Ukraine) have demonstrated the effectiveness of combat drones, driving innovation in this space
• Drone Swarms: NewSpace Research and Technologies is developing swarm drones and AI-enabled autonomous systems for offensive and surveillance applications

Artificial Intelligence and Autonomous Systems

AI in Combat and Strategy

• AI-Powered Mission Planning: AI-Powered Mission Planning & Debrief System using real-time data analytics for combat strategy
• Autonomous Warfare: Akashteer, an AI-powered air defence system, offers rapid responses to fast-moving aerial threats without human intervention
• Battlefield Control: TEN AI Weapon System (TAIWS) provides next-gen AI-powered battlefield control

Space Technology

Military Space Applications

• Satellite Launch: Skyroot Aerospace builds cost-effective small satellite launch vehicles critical for military satellite deployment
• Hyperspectral Imaging: Pixxel operates space-based surveillance solutions with hyperspectral satellites for military intelligence
• Tactical Reconnaissance: Miniaturized Multi-Payload Satellite (Garuda Mission) represents a breakthrough in tactical space reconnaissance

Despite significant progress, India's defence startup ecosystem faces several persistent challenges that impede growth and innovation. This section examines the key obstacles across regulatory, financial, technical, and market dimensions.

Bureaucratic and Regulatory Hurdles

Complex Procurement Processes

• Long sales cycles and opaque evaluation standards slow down startup momentum
• Disconnect between procurement process and financial side that doesn't match the need or intent on the ground
• Lengthy procurement processes delay the deployment of new technologies
• Bureaucratic hurdles in procurement create cash flow challenges for startups

Regulatory Complexity

• Complex compliance norms slow down startup growth and innovation
• Regulatory bottlenecks hinder operations and scalability
• Dual-use regulatory grey zones: Certain technologies (e.g., satellite data, cryptography) face regulatory ambiguity

Funding Challenges

Limited Access to Capital

• Securing sufficient funding for research and development remains a critical obstacle
• Venture capital has traditionally hesitated in dual-use or hardtech domains
• Limited private investment due to long gestation periods and regulatory complexities

Despite the challenges, India's defence startup ecosystem is positioned to capitalize on significant opportunities driven by global trends, domestic modernization, and strategic partnerships. This section explores the key opportunities for growth and impact.

Export Potential and Global Markets

Ambitious Export Targets

• India's defence exports have surged from ₹686 crore in 2013-14 to ₹23,622 crore in 2024-25, marking a remarkable 34-fold increase over the past decade
• The government has set an ambitious target of achieving annual defence exports of ₹50,000 crore by 2029
• This target represents more than a 100% increase from the present level, indicating significant growth opportunities

Expanding Global Reach

• India is currently exporting defence items to nearly 80 countries worldwide
• In FY 2024-25, India exported a wide array of defence items including ammunition, weapons, systems/subsystems, and components
• Strategic partnerships with countries like the UAE, France, and ASEAN nations focused on unmanned systems, cybersecurity, and simulation technologies

This section presents detailed case studies of four standout Indian defence startups that exemplify the innovation, growth, and impact potential of the ecosystem.

ideaForge: Pioneering Indigenous UAV Technology

Company Overview

• Founded: 2007 by Ankit Mehta, Rahul Singh, and other IIT Bombay alumni
• Headquarters: Mumbai, Maharashtra
• Specialization: Unmanned Aerial Vehicles (UAVs) for defense, security, and enterprise applications
• Notable Achievement: India's first defense-focused startup to go public with a successful IPO in 2023

Technological Innovation

• NETRA 5: Launched at Aero India 2025, this next-generation UAV features AI-powered capabilities, GNSS-denied navigation, and autonomous operations
• SWITCH V2: Enhanced version of their flagship vertical takeoff and landing (VTOL) fixed-wing UAV with 20km+ range and up to 150 minutes flight time

Tonbo Imaging: Revolutionizing Defense Optics and Imaging

Company Overview

• Founded: 2012 by Arvind Lakshmikumar, Ankit Kumar, and Cecilia D'Souza
• Headquarters: Bengaluru, Karnataka
• Specialization: Advanced imaging and sensor systems for military reconnaissance, infrastructure security, and transportation safety
• Valuation: ₹1,500 crore (as of April 2025)

The future of India's defence startup ecosystem will be shaped by evolving policy frameworks, technological advancements, and strategic imperatives. This section provides a forward-looking analysis of key trends and developments expected over the next five years.

Policy Evolution and Strategic Priorities

Defence Reforms and Modernization

• 2025: The Year of Defence Transformation - The government has designated 2025 as the Year of Defence Reforms, signaling a decisive push towards modernizing military structures, integrating cutting-edge technologies, and strengthening strategic deterrence
• Increased Defence Spending - Recommendations to increase defence spending to at least 3.5% of GDP to counter growing threats, particularly from China's rapid military modernization

Atmanirbhar Bharat in Defence

• Private Sector Empowerment - Breaking the monopoly of defence PSUs and empowering the private sector to play a leading role in defence manufacturing
• Direct Contracts to Startups - Providing direct defence contracts to startups, bypassing traditional procurement hurdles to accelerate innovation

Based on the comprehensive analysis of India's defence startup ecosystem, this section provides actionable recommendations for key stakeholders to accelerate growth, innovation, and self-reliance in this strategic sector.

For Government and Policy Makers

Streamline Procurement and Regulatory Processes

• Create a Single-Window Clearance System for defence startups to navigate regulatory requirements, export controls, and procurement processes
• Reform the L1 (Lowest Bidder) System to incorporate quality, innovation, and lifecycle cost parameters in procurement decisions

Enhance Funding and Financial Support

• Increase Defence Innovation Funding to at least ₹1,000 crore annually through iDEX and other innovation programs
• Create a Defence Technology Venture Fund with government and private participation to provide growth capital for scaling defence startups

For Investors and Financial Institutions

Adapt Investment Strategies

• Develop Defence-Specific Investment Expertise to better evaluate defence technology startups
• Create Specialized Defence Technology Funds with longer investment horizons aligned with defence procurement cycles

India's defence startup ecosystem stands at a pivotal moment in its evolution. From a nascent sector just a few years ago, it has grown into a vibrant community of innovators developing cutting-edge technologies across multiple domains. This transformation aligns perfectly with India's strategic imperative for self-reliance in defence and its ambition to become a major global player in defence technology and exports.

The ecosystem's strengths are evident in several areas:

• Policy Support: Government initiatives like iDEX, Defence Testing Infrastructure Scheme, and Positive Indigenisation Lists have created an enabling environment for startups
• Technological Innovation: Indian startups are developing world-class capabilities in unmanned systems, AI, space technology, advanced electronics, and cybersecurity
• Growing Investment: Increasing interest from venture capital, strategic investors, and government funding mechanisms is fueling innovation and growth
• Export Potential: The dramatic rise in defence exports, from ₹686 crore in 2013-14 to ₹23,622 crore in 2024-25, demonstrates the global competitiveness of Indian defence products

However, significant challenges remain:

• Bureaucratic Hurdles: Complex procurement processes and regulatory frameworks continue to impede startup growth and innovation
• Funding Gaps: While early-stage funding has improved, growth-stage capital remains limited
• Infrastructure Constraints: Access to testing facilities and specialized manufacturing infrastructure needs further improvement
• Market Access Barriers: Startups still face difficulties in navigating defence procurement and establishing credibility with military users

The journey toward a self-reliant defence ecosystem is not just about national security—it represents a significant economic opportunity and a pathway to technological leadership. By nurturing its defence startup ecosystem, India can simultaneously enhance its strategic autonomy, create high-skilled jobs, drive technological innovation, and establish itself as a trusted global supplier of defence technologies.