Indian chip startups face funding gap from design to production

Indian semiconductor and physical-AI companies raised $523.3 million across 44 deals in 2025, up from $114.4 million across 48 deals in 2024, according to Tracxn data reviewed by Mint. They raised another $193.3 million across 26 deals through 10 August this year. However, Mint reports that the funding funnel narrows sharply after the seed stage: from 2023 through 2026 so far, the sector recorded 94 seed and angel deals against just 20 Series A deals.

State support has been strongest at the design stage, with at least 24 projects under the Design Linked Incentive scheme and 105 companies accessing advanced chip-design tools, the government said in June. Tape-out, the point at which a design is sent to a foundry for manufacturing, is a critical milestone but does not guarantee a commercial product. A Bengaluru-based founder of an AI processor startup told Mint on condition of anonymity that the money often runs out before the first silicon is produced. He said an initial batch of about 100 chips would cost roughly $6.3 million.

Hemant Mohapatra, partner at Lightspeed and a former AMD executive, said a first tape-out at a leading node can cost $30-40 million, while a mature 160nm process may cost $150,000-200,000. He said the market is bimodal, making it harder for startups lacking globally competitive technology or high-volume demand to raise funds. An investment banker advised that founders may need to raise smaller rounds, meet milestones, and return for more capital in a staggered manner.