India’s defence sector is entering a new chapter—one where the focus is not just on protecting our borders, but on building the strength to do so with homegrown technologies. An apt example of this shift is the newly inaugurated BrahMos Aerospace Integration and Testing Facility in Lucknow, part of a larger national effort to ramp up indigenous manufacturing under the ‘Make in India’ banner. The trend presents an unprecedented opportunity for Indian startups to enter the defence ecosystem, innovate rapidly and shape the future of national security while building globally competitive, cutting-edge defence solutions right here at home. Startups like ideaForge, whose UAVs are now a staple for the Indian Armed Forces, and Tonbo Imaging, which provides advanced imaging and sensor systems for night vision and battlefield awareness, have already demonstrated that Indian startups can deliver mission-critical technologies. Sagar Defence Engineering has developed autonomous marine systems that aid in maritime security, while Big Bang Boom Solutions is working on anti-drone technologies; its Vajra Sentinel Systems being famously deployed by the Indian Air Force during Operation Sindoor. These instances exemplify the capacity of Indian startups in the high-stakes defence sector.

But are we doing enough? Despite the wins, India still does not have a single unicorn in the defence startup space. In contrast, the United States, Israel and China have several startups surpassing the $1 Bn mark. Nevertheless, going by the current trend, the prospects are high for defence startups. With Defence Industrial Corridors taking shape and policies encouraging domestic innovation, India is steadily reducing its reliance on imports and stepping up as a serious player in global defence exports—a development that’s poised to create a nurturing ground for startups in the defence sector.

1. Growing defence market: Valued at $27.1 billion in 2024, the market is expected to double to $54.4 billion by 2033. With ambitious national targets of achieving Rs. 3 lakh crore (approx. $34.7 billion) in defence production and Rs. 50,000 crore (approx. $5.8 billion) in defence exports by 2029, India is poised to emerge as a key player in the global defence ecosystem.
2. Substantial budget allocation: India’s defence budget for 2025–26 has climbed to an impressive Rs. 6.81 trillion ($78.7 billion), marking a 9.5% jump from the previous year. This substantial investment underlines the nation’s commitment to strengthening its military capabilities and modernising its defence infrastructure.
3. Push for self-reliance and import reduction: Historically, India has been one of the world’s largest arms importers. However, recent times have witnessed a significant reduction in imports, with a 9.3% drop in India’s share of global arms imports between 2015-19 and 2020-24. This shift indicates a growing emphasis on indigenous defence production.
4. Increasing defence exports: India’s defence exports reached a record high of Rs. 23,622 crore (approximately $2.76 billion) in the fiscal year 2024-25, reflecting a 12.04% growth over the previous year. This surge demonstrates the global potential of Indian defence products and the opportunity for startups to tap into international markets.

Government initiatives fuelling defence innovation

1. Innovations for Defence Excellence (iDEX): The iDEX programme aims to drive innovation in India’s defence and aerospace sectors by providing targeted financial support to startups, MSMEs, and individual innovators. Through its Advanced Defence Technology Innovation (ADITI) challenge, selected projects can receive product-development grants of up to Rs. 25 crores. Additionally, the iDEX Defence India Startup Challenge (DISC) offers funding of up to Rs. 1.5 crore, while iDEX Prime extends financial support up to Rs. 10 crores. These funds are valuable for developing prototypes, offering an excellent springboard for early-stage startups.
2. Defence Industrial Corridors: India has established two Defence Industrial Corridors, each in Uttar Pradesh and Tamil Nadu, to promote indigenous production of defence and aerospace-related items, thereby reducing imports and driving exports. These corridors offer infrastructure support, streamlined regulations and opportunities for collaboration between private companies, public sector undertakings (PSUs) and international firms. However, startups may not have enough capital bandwidth to invest in such zones. Under the given situation, startups may consider forming consortia with MSMEs or industrial partners to share infrastructure costs.
3. SIDBI Cash Defence: The SIDBI Cash Defence scheme brings an air of respite for defence startups trying to navigate bottlenecks in executing work orders. The scheme provides short/medium-term financial support to eligible defence MSMEs by way of purchase order financing for executing confirmed work orders with financial assistance of up to Rs. 20 crores.
4. Technology Development Fund (TDF): Managed by the Defence Research and Development Organisation (DRDO), the Technology Development Fund (TDF) is a pivotal initiative aimed at fostering the indigenous development of defence technologies by supporting startups, MSMEs and academia. The scheme provides grants of up to Rs. 10 crores per project for the development of niche technologies that the Indian Armed Forces can eventually absorb. TDF is particularly focused on bridging the gap between prototype development and actual defence deployment—a phase where many startups struggle due to a lack of capital or access to testing. For startups, the key is to align their R&D with the problem statements issued under TDF and build proof-of-concept models that demonstrate strategic utility.

Areas to focus on

1. Dual-use technologies: It’s smart for startups to build dual-use technologies with both military and civilian applications. Technologies like AI, drones, autonomous systems and cybersecurity have both civilian and defence use cases. Startups can tap into these dual markets to stay financially sustainable while developing defence-ready solutions. For example:

• ideaForge: Founded by IIT Bombay alumni, ideaForge dominates the Indian UAV market with a 50% market share. Its products are extensively used by the Indian armed forces, state police forces and organisations like the DRDO.
• QNu Labs: QNu Labs is India’s pioneering quantum cybersecurity company that has also established significant collaborations with India’s defence sector, securing multiple procurement contracts with the Indian Army and the Indian Navy, and advancing India’s defence capabilities through quantum technologies.
• Indrajaal: Indrajaal, developed by Hyderabad-based Grene Robotics, is India’s first AI-powered wide-area autonomous drone defence system. Designed to protect critical infrastructure such as nuclear plants, oil refineries, ports, airports and power grids, Indrajaal offers real-time airspace security over areas up to 4,000 square km. It is operational at a naval port in Gujarat and is also deployed at India’s largest naval port in Karnataka.

2. Fast, frugal innovation: Startups can identify micro-challenges faced by jawans, officers and logistics units. These could be as specific as better grip gloves for cold climates, portable charging solutions for long treks, or faster tools for field medical assessment. These seemingly small pain points often go unnoticed by large defence players, but solving them can yield a massive impact and open the door to deeper engagements. For example:

• Axio Biosolutions: The startup has designed smart body armour and trauma care kits for soldiers operating in hostile environments.
• Signaltron Systems: The startup develops portable, lightweight, mission-ready communication and navigation solutions tailored for defence and aerospace applications. Last year, the Indian army inducted the first-ever indigenous chip-based 4G mobile base station, procured from Signaltron.

Challenges startups must prepare for

1. Long and complex procurement cycles: Unlike B2B or B2C markets, defence contracts often take years to materialise, often exhausting the financial runway and patience of startups. Many get trapped in repetitive trials, feedback loops and “wait-and-watch” situations without any purchase commitments.

To avoid exhaustion, startups may try and validate their innovations with adjacent markets like police and paramilitary forces (e.g., CRPF, BSF), etc.

Example: ideaForge initially collaborated with Indian police forces and disaster management agencies to deploy their UAVs, building credibility and operational experience. These deployments facilitated subsequent contracts with the Indian Army, including a significant order for SWITCH UAVs.

 

2. High-risk funding environment: Many venture capitalists are wary of defence startups due to long R&D cycles, limited commercial crossover and complex regulations. This creates a funding gap, especially at the post-prototype, pre-scale stage.

To bridge the funding gap, defence startups can explore a combined option of grants, defence-focussed investments and strategic partnerships. Government schemes like iDEX, TDF, etc., can offer crucial early-stage support, especially for high-R&D technologies. At the same time, startups should look beyond traditional VCs and approach defence-focused investors or strategic partners such as Bharat Electronics Limited (BEL) or Hindustan Aeronautics Limited (HAL).

Example: Eastern India’s biggest UAV startup and IIMCIP-incubated venture, Drones Tech Lab, collaborated with state governments, disaster management agencies and corporates in the oil and energy sectors even after securing its first major order with DRDO. This approach not only strengthened their credibility and on-ground experience but also ensured steady revenue while awaiting the lengthy defence procurement process. Simultaneously, the startup capitalised on defence innovation grants under iDEX initiatives like ADITI 1.0 and DISC 9. Taking its vision further, Drones Tech Lab launched EduRade, a dedicated training wing offering top-notch drone pilot training to enthusiasts from diverse backgrounds.

 

The Indian defence sector represents more than just a growth opportunity; it is a national imperative. For startups, it offers a unique platform to develop technologies that can safeguard lives and secure the borders. While Indian startups possess the grit and the potential, what’s needed now is a full-fledged ecosystem that nurtures long-term, capital-intensive and strategically critical innovations with the seriousness they deserve. Though government policies and pilot funding are suitably set in place, achieving scale will require concerted efforts to mobilise institutional support and private capital. If India is to truly become a defence manufacturing hub, steeped in the ambitious vision of Atmanirbharta (self-reliance), building deep-tech unicorns in this space isn’t just desirable; it’s a necessity.