India must seize its Yozma moment

The news that the Technology Development Board (TDB), an organisation under the Department of Science and Technology, Government of India, has funded 22 deeptech projects – in 14 startups, five MSMEs and three listed companies – as a second-level fund manager for the Research Development and Innovation Fund (RDIF) marks what is likely to be an epochal moment in India’s industrial history.

This is the first tranche of funding under the Rs-1 lakh crore RDIF that aims to propel India’s deeptech ecosystem to be on par with the best in the world. The RDIF funds up to half of the project cost through equity, debt or a combination of both.

This announcement brings back memories of how Israel transformed into a ‘startup nation.’ While Israel had really brainy tech talent and early-stage startups with great ideas, it lacked a financing model that could convert this talent into industrial applications at scale. The solution? In 1993, the Israeli government launched the Yozma programme. Yozma means initiative in Hebrew.

Rather than handing out traditional grants, Yozma pioneered an ingenious equity co-investment model. The government invested in venture capital funds along with private investors in a novel risk-sharing arrangement. The masterstroke was that private partners could buy out the government’s stake later, at a predetermined price, heavily incentivising private participation.

The results were seismic. Before Yozma, Israel had a single VC fund and roughly 51 startups. Within a decade, the ecosystem exploded to 80 funds, with startup numbers peaking at 600 by the late 1990s.

Out of the Yozma crucible emerged foundational Israeli VCs and deeptech powerhouses like Waze, which Google acquired for $1.15 billion and Mellanox, which Nvidia acquired for $6.9 billion.

Yozma didn’t just write cheques; it engineered a thriving ecosystem. The first RDIF disbursal made in record time could be India’s Yozma moment.

The good news is that many of the projects chosen by TDB from over 100 proposals are from companies that have proven their technological capabilities, and this initiative has a good chance of propelling them to technology and business leadership. The following examples illustrate their potential:

QNu Labs – A quantum communications startup that has developed the QShield, a security-as-a-service platform comprising multiple components, including quantum key distribution (QKD), quantum random number generators, and post-quantum cryptography.

Their solutions are being deployed in India’s defence, telecom, financial services, and healthcare sectors. As a pioneer in deep-tech cybersecurity, QNu Labs is shielding India’s critical data infrastructure from the threat of quantum computing attacks.

Tejas Networks – A listed optical, broadband, and data networking products company that sells its products in India and 75 other countries. It is the primary domestic technology supplier for BSNL’s nationwide 4G and 5G network rollout and the cornerstone of India’s push for self-reliant telecommunications infrastructure, designing cutting-edge networking products and deploying them globally.

Eyestem Research – It advances regenerative medicine by developing scalable, affordable cell therapies for globally incurable retinal diseases like dry age-related macular degeneration. Eyestem recently secured the Indian regulator CDSCO’s approval for Phase 2 human trials of its flagship product, Eyecyte-RPE. By reducing the astronomical manufacturing costs associated with cellular treatments developed elsewhere, Eyestem aims to make advanced vision-saving therapies accessible to Indian patients.

Agnikul Cosmos – Spearheading India’s private space revolution, Agnikul Cosmos successfully built and launched Agnibaan, featuring the world’s first single-piece 3D-printed semi-cryogenic engine. They have established India’s first-ever private launchpad and mission control centre at Sriharikota, working in close synergy with ISRO and IN-SPACe, and are cementing India’s position as a flexible, cost-effective global destination for commercial space missions.

Ather Energy – A listed company that has played a foundational role in accelerating India’s transition to electric mobility by engineering high-performance, smart electric scooters designed for Indian conditions. They have heavily localised their supply chain and manufacturing operations, producing their own battery packs and driving large-scale job creation at their facilities.

Early wins count

The potential of the 22 startups, MSMEs, and listed companies and their projects chosen by TDB is significant for India. First, it is securing technological sovereignty in diverse technologies such as 3D-printed rockets to quantum cryptography. Second, their aggressive push into advanced manufacturing and cutting-edge R&D will create high-paying jobs, directly combating brain drain. Third, we are jump-starting sophisticated domestic supply chains for tech products like EV batteries, aerospace materials, and optical network components. Fourth, they are opening lucrative export markets and shifting India’s image from just a services hub to a deeptech product innovation powerhouse. Finally, effective funding will help these exemplars build investor confidence, actively attracting crucial domestic and global capital into India’s growing deeptech sector.

While sceptics may argue that the companies supported in the first tranche shouldn’t need government funding to scale up and commercialise their R&D and innovation efforts, it is important for the future of the RDIF to have some early successes, particularly in key strategic deeptech domains, that will demonstrate the utility and efficacy of the model and secure its long-term legitimacy. This will also underline the government’s intent to be a partner in the long-term capability development of Indian industry and deeptech.

The government, through TDB, has shown the way. As a critical next step, we must facilitate at least ten private Indian entities to step up as second-level fund managers for the RDIF during FY 2026-27. This will be essential for amplifying the RDIF model and paving the way for larger investments.

(Rishikesha is Professor of Strategy at IIM Bangalore; Dayasindhu is co-founder and CEO of itihaasa Research and Digital)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.