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The Indian space ecosystem has commenced addressing a longstanding challenge crucial to fostering innovation—specifically, the necessity for patient capital investment. Indeed, ensuring that private venture capitalists continue to pursue innovations that require extended development periods is of great importance. However, the space ecosystem is cognisant that no other Indian entity can match the level of patience demonstrated by the Indian government.
In 2026, the Indian government introduced substantial patient capital to promote space-technology innovation through various initiatives, including the Research, Development and Innovation Fund, the Indian National Space Promotion and Authorisation Centre’s two funds, viz. the Antariksh Venture Capital Fund and the Seed Fund Scheme, and numerous low-TRL innovations financed by scientific funding agencies such as the Anusandhan National Research Foundation. Furthermore, as the Indian economy advances, the government—serving as the primary customer for the entire Indian space sector—will require a corresponding increase in patient capital coming from the government.
There is an implicit understanding in the space ecosystem that the patience demonstrated by the government is fundamentally a strategic endeavour; it is predominantly directed towards long-term, nationally significant projects, such as multi-decade nuclear and missile research and development initiatives. But what happens when the government has to adopt a reactive approach, addressing rapidly emerging situations and tactically countering unforeseen challenges? For such compelling circumstances, patience is not a virtue; rather, it becomes an obstacle. An illustrative example is the expedited research and development of vaccines during the global COVID-19 pandemic. The Indian government contributed approximately INR 900 crores for expedited vaccine R&D and INR 1300 crores for the broader R&D required for COVID-19 mitigation, while the total expenditure on deployment domestically and for Vaccine Maitri amounted to approximately INR 36,398 crores. What India deployed certainly was not patient capital; it was the exigent and tactical capital deployed as a war on the pandemic.
The urgency stems from the fact that the next conflicts India may face would demand that military commands maintain innovation laboratories working on tactical innovations in the background.
Aversion to Spin-off Technologies
While patient capital is allocated for ventures such as ‘mango orchards,’ India’s pressing ‘space defence’ requirements necessitate the development of a space market that functions akin to a bamboo plantation—quick to grow, easy to farm, non-perishable, with multiple applications, and capable of generating substantial revenue. It is expected that Indian space startups develop capabilities to promptly assist governments in emergency scenarios, such as firefighting efforts, tactical homeland and border security operations, and incidents involving industrial hazards and natural calamities. Such urgent needs demand exigent innovations, and achieving them requires not patient capital but ‘tactical capital’. This is the juncture at which Indian venture capital funds, traditionally cautious, must now adapt. The urgency stems from the fact that the next conflicts India may face would demand that military commands maintain innovation laboratories working on tactical innovations in the background.
While the core innovation is always at the centre stage of any startup and its financing venture capital funds, what must be taken into account is the entire gamut of ‘spin-off’ possibilities they could finance and support, many of which are not easy to forecast. Indian VCs very well can finance these spin-offs through cross-licensing deals, restructuring the parent company into a holding company, or executing a clean equity ‘carve-out’ in which the new entity has its own distinct valuation and capital injection mechanism.
Although the acquisition of patience by Indian private equity and debt capital is a positive sign, there is also a need for ‘milestone-based financing’. While milestones—spaced over 12–18 months—are frequently structured around monetisation metrics, it is also essential to consider monitoring the density of intellectual property in an innovation project as an additional metric.
For example, a fundamental space innovation should be monitored at every stage of the technology readiness level due to its potential to generate spin-offs. When a viable spin-off emerges, the innovation company and its venture capital fund can clearly distinguish the core intellectual property from the new intellectual property that arises from it. While high-end technologies are vulnerable to market failures, the innovation company can mitigate the associated risks by possessing dense, high-quality intellectual property assets that can be sold to recover the initial investment. Furthermore, a spin-off reconnects the innovation company with early-stage research, development, and government innovation grants, often involving new research and development talent. In cases where the spin-off functions as a tactical innovation with a strong ‘spin-off product–exigent market fit’, there is a substantial probability that the new intellectual property can generate commercial benefits for the company.
Numerous Indian venture capital (VC) firms tend to exhibit risk aversion and scepticism when assessing the potential of tactical innovations, and end-users, too, face challenges. They frequently encounter questions such as who evaluates the likelihood that a spin-off technology will emerge as a viable outcome from the core innovation; who determines its value; and how effective the ‘spin-off product and exigent market fit’ is identified by both the innovator and the potential end-users.
Tactical Innovation and the Venture Capital Gap
Tactical innovation is primarily initiated outside the traditional boardrooms of venture capital firms. It initially manifests in laboratories and workshops through individuals operating at the forefront—namely, scientists and engineers—and may not necessarily involve founders or venture capital managers. Occasionally, tactical innovation may also emerge in the field, originating from existing end-users who may or may not possess the resources to further rationalise, validate, and scale it.
Tactical innovations must operate within the constraints of limited gestation and development durations. This necessitates the swift identification and deployment of talent, coupled with efficient and expedited project execution.
Tactical innovation addresses a challenge; it can also serve as a competitive advantage, induce surprise, and may necessitate a significant capital investment for brief periods. Every startup, incubator, research park, accelerator, and venture capital fund manager should be prepared to meet such exigencies.
Tactical innovation addresses a challenge; it can also serve as a competitive advantage, induce surprise, and may necessitate a significant capital investment for brief periods.
Indian VC funds often struggle to clear regulatory hurdles, which can consume up to half of a product’s lifecycle. This severely disrupts financial-return modelling. Most VC funds are straitjacketed; they do not favour the complexities of equity restructuring associated with startups. In many cases, the core team working on an innovation is secondary to the spin-off, delaying the pace of the core innovation. This makes such fund managers averse to spin-offs. Indian VC fund managers rarely engage with specialised subject-matter experts—based in national laboratories, academia, and other industries—who could assist with due diligence on tactical innovation. They therefore lack the ability to technically audit spin-offs.
Building a Tactical Space Innovation Ecosystem
From a security perspective, India has established the essential infrastructure necessary for tactical innovation. In this context, the design bureaus and technology boards within the armed forces function as the primary catalysts for tactical progress. The DRDO’s Technology Development Fund and the Innovation for Defence Excellence (iDEX) offer vital financial and logistical support, while numerous defence-related incubators and centres of excellence serve as laboratories for tactical innovation. The innovations now occurring in the Indian defence ecosystem in unmanned aerial vehicle technologies, triggered by recent conflicts in Eurasia and West Asia, are examples of tactical innovation. This tactical innovation has parallels with what is termed impatient innovation in Israel. In Israel, the military at the command level is closely integrated with venture capital firms, helping to expedite innovation necessary for battlefield applications.
A comparable model is vital for tactical space innovation, wherein the Space Technology Incubation Centres (STICs), Space Technology Cells (STCs), Regional Academic Centres for Space (RACS), and other ISRO-supported entities could constitute the foundation of innovation. The RDI Fund, the Antariksh Venture Capital Fund, and the Mission DefSpace Challenge would form the financial backbone, with the Defence Space Agency and the tri-services acting as the primary drivers. The STICs and RACS of ISRO, located across various university campuses, have yet to demonstrate significant activity since their establishment a few years ago. Utilising these institutions for tactical civil-military innovation would provide the necessary impetus for more rapid response and enhanced tactical performance.
Although India’s innovation ecosystem may continue to develop long-gestation products, it is essential to acknowledge that ‘drastic times call for drastic measures’; therefore, the ecosystem must be prepared to pursue tactical innovation.
The utilisation of space assets during Operation Sindoor may or may not have required tactical innovation. However, it is evident that, should India engage in an extended hot conflict or a prolonged war, its defensive and offensive capabilities will depend heavily on tactical innovation. Although India’s innovation ecosystem may continue to develop long-gestation products, it is essential to acknowledge that ‘drastic times call for drastic measures’; therefore, the ecosystem must be prepared to pursue tactical innovation. Patient capital can facilitate both sustained and tactical innovation simultaneously. For the latter, key drivers—including financial and logistical infrastructure, laboratories, and centres of excellence—must be integrated into India’s tactical innovation priorities through civil-military fusion.
Chaitanya Giri is a Fellow with the Centre for Security, Strategy, and Technology at the Observer Research Foundation.
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