How do investors put a price on possibility? When a company has no revenue today but owns intellectual property and scientific discoveries with the potential to reshape entire industries, how should its future promise be valued before any commercial success exists?
This is one of the hardest questions in startup investing today.
For many years, venture capital investors mainly backed software companies. Those companies were easier to judge–these companies could launch a product in a few months, start getting customers within a year, and show numbers such as revenue growth, customer acquisition cost, and monthly subscriptions.
But deep-tech companies are very different. A startup building a quantum sensor, a new semiconductor design, a defence drone, an advanced material, or clean battery technology may take five to seven years to earn serious revenue. For most of that time, its value may not lie in sales, but in its patents, lab results, government approvals, technical talent, and,most importantly, ensuring timely completion of technical milestones. Traditional startup metrics do not capture this properly.
That is why investors need a different way to value deep-tech companies.
In India, this question has become more important as the country seeks to develop strategic technologies domestically. Defence, space, semiconductors, advanced manufacturing, and dual-use technologies are no longer just business opportunities. They are also linked to national security, supply chain independence, and India’s ambition to become a major technological power. This is visible in government programmes such as India’s Rs 1 trillion Research, Development and Innovation scheme (Department of Science and Technology, Government of India).
Recognising the importance of deep-tech is only the first step. The harder and more consequential task is learning how to evaluate these companies with rigour. That means building a framework that takes both the science and the business seriously and resists the temptation to either dismiss early-stage companies for lacking revenue or to fund them simply because the technology sounds impressive. Before moving a company forward, VCs should evaluate it against seven fundamental criteria:
Stage of Technology: A lab result is not the same as a commercial product. Investors often use Technology Readiness Levels (TRLs) to track the journey from scientific proof-of-concept to real-world deployment, but TRLs alone are not enough. Different technologies face very different paths to commercialisation–a semiconductor, medical device, defence system, and battery technology may all sit at the same TRL while requiring vastly different amounts of time, capital, manufacturing capability, and regulatory approvals to reach the market.
Ease of Manufacturing: Many startups can build one rugged prototype. The real test is producing hundreds of units at consistent quality and competitive cost–and in India's context, whether that's possible against Chinese, European, or US imports.
Strength of Intellectual Property: Patent count is a poor proxy for defensibility–in deep-tech, companies may avoid filing patents because disclosure can help competitors copy the technology. The real moat often lies in tacit know-how: proprietary processes, manufacturing expertise, experimental learning, and technical knowledge embedded in the founding team. Investors must assess not just what is protected on paper, but what is genuinely hard to reproduce.
Technical depth of the team: Deep-tech founders must solve problems that very few people in the country can. It is critical to understand whether this team can move between the lab, the factory, the customer, and the regulator.
Economies of scale: A technically brilliant product can still be a bad business. Green hydrogen components, defence hardware, medical devices - each faces adoption barriers rooted in price, procurement cycles, and buyer workflows; understanding the interplay of whether the science makes business sense is critical.
Credible external validation: iDEX (Innovation for Defence Excellence) selection, BIRAC (Biotechnology Industry Research Assistance Council) support, Anusandhan National Research Foundation (ANRF) grants, Ministry of Electronics and Information Technology’s backing–these signal that informed technical evaluators have already applied filters most investors cannot. Non-dilutive funding is a very helpful mark of credibility.
Buyers and Timelines: Defence procurement, semiconductor qualification and various other sales cycles within deep-tech move slowly. It is crucial to look for early demand signals: letters of intent, joint development agreements, qualification trials. Deep-tech companies must be valued by milestones, not revenue.
The thread connecting these metrics is a willingness to underwrite scientific judgment alongside commercial judgment. Many deep-tech startups fail during the stage between proving that a technology works and turning it into a product customers can buy. This often happens because investors are used to judging progress through sales and revenue, not scientific or engineering achievements. As a result, companies with strong technology can struggle to raise more funding, even when they are making important breakthroughs and moving steadily toward commercialisation.
Closing that gap will require scientists and engineers as decision-makers rather than advisors, diligence processes built around technical milestones, and capital structured to match seven-to-ten-year development arcs.
The next decade will favour funds that learn to read these signals.
*Amit Chand is founder of BYT Capital, an early-stage deep-tech VC firm. Views are personal.
