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Sky has never been the limit for them. Almost a decade ago, Sameer Joshi, a fighter pilot, and Julius Amrit, an IIT-IIM alumnus, were part of Team Indus that geared up for an audacious challenge—land a rover on the Moon. Though they didn’t clinch the Google Lunar XPrize, they earned enough funds, as finalists, to dream big. In 2018, Joshi and Amrit launched a defence startup, NewSpace Research and Technologies (NRT), in Bengaluru. It is now India’s mostfunded defence and aerospace startup, with a kitty of Rs 72 million.NRT makes long-endurance drones, which can fly for long durations, and robotic swarms—in which a multitude of robots are coordinated to perform complex tasks such as search-and-rescue missions and destruction of enemy assets—for the Indian armed forces. “Our patented swarming technology is the world’s first high-density swarm solution delivered to a national defence force,” says Joshi, a former MiG-21 and Mirage-2000 pilot. He says their systems perform flawlessly even in extreme, high-altitude conditions, subtly alluding to the rugged Himalayan terrain where Indian and Chinese forces remain at loggerheads.NRT is not alone on this new frontier of India’s defence sector. In five years, over a thousand defence startups have come up, developing everything from robotic swarms to drone-dropped bombs. The next test is whether they can get enough funding to scale up and meet the evolving demands of modern battlefields.ARMS & THE FIRMSAs the ongoing conflicts in Ukraine and West Asia have revealed, aircraft, artillery and tanks, which were once integral to old battle plans, have retreated. Cutting-edge technologies such as artificial intelligence, unmanned aerial vehicles, unmanned underwater vessels and facial recognition systems are taking centrestage. The blasts triggered by communication devices in Lebanon are a stark reminder of the shifts that have taken place in this new faceless war.Vrinda Kapoor, founder and CEO of Delhi-based 3rdiTech, says India’s defence startups are involved in two tasks—producing cutting-edge products and/or developing breakthrough technologies. Her company, which employs nearly 100 people, is focused on the latter. “Our goal is to position ourselves as India’s first semiconductor major. It is an untapped market with immense potential. The annual defence procurement for the semicon industry in India is about Rs 5,000 crore,” she says, adding that her firm will also supply for other sectors such as automotive and telecommunications, apart from focusing on exports.113771693Kapoor’s 3rdiTech is one of the companies involved in a strategic technology partnership that is at the heart of India’s collaboration with the US to develop a national security semiconductor fabrication plant. Announced after the meeting between PM Narendra Modi and US President Joe Biden in Delaware last week, the partnership is between the US Space Force, 3rdiTech and Bharat Semi.Unlike in other sectors, startups in defence work closely with the government. Several companies have secured contracts through Innovations for Defence Excellence (iDEX), a government initiative that was launched in 2018, to offer financial support and guidance to startups. According to data available with the ministry of defence, 500 startups have signed contracts under iDEX and Technology Development Fund, another scheme to handhold startups.Defence startups range from Delhi-based Aero Arch, which has secured an order from the Indian Army to produce robotic MULE — multi-utility legged equipment — that can carry loads across challenging terrains, to Pune-based Zeus Numerix that develops precision guidance kits for 81mm mortars, and drone-dropped bombs.113771711“Modern wars have taught us that the most successful weapon systems share key traits: small, precise, effective, autonomous and reliable— what we call SPEAR,” says Abhishek Jain, chief business officer of Zeus Numerix. It began as an informal group of faculty and students at IIT-Bombay and evolved into a commercial enterprise in 2004.Jain says their flagship products—the 81mm guided mortar, which he compares to Israel’s Iron Sting, and drone-dropped munitions— are in high demand both in India and abroad. Iron Sting, a 120 mm guided mortar munition, developed by Haifa-based Elbit System, was used for the first time by Israel only last year in its war against Hamas.While some companies are making drones, others are busy developing anti-drone technology. The flagship product of Big Bang Boom Solutions, a Chennai-based startup, is an advanced antidrone system that can detect and neutralise drones from up to 10 km away, giving the armed forces a strategic edge in the battlefield.“Given the evolution of drones in conflicts like Ukraine and in our own country, it is crucial for military forces to have competent anti-drone technology,” says founder Shivaraman Ramaswamy, who earned a doctorate in nanomagnetism before venturing into the defence sector.Big Bang Boom Solutions has embarked on another ambitious project—develop situational awareness systems for armoured vehicles, which could be instrumental in unmanned tanks in the future. The See-Through Armour project, developed in collaboration with the Indian Army, integrates militarygrade cameras and AI-powered systems in tanks, providing commanders with a 360-degree panoramic view from inside the vehicle.This real-time data allows for swift detection of threats, such as low-flying drones, that might otherwise escape notice. Big Bang Boom Solutions raised Rs 250 crore in its latest round of funding in September. It was led by Mumbai Angels Network, Vyom Family Office, SBI Startup Branch Chennai and Asquare Investing.Meanwhile, Ahmedabad-based Optimized Electrotech is developing surveillance systems. Founded by 43-year-old Sandeep Shah, it specialises in multispectral imaging and weapon sights. Its products— NoctVision, InfiVision and ClearVision—offer surveillance solutions for ranges spanning 5 km to 30 km. These are priced between Rs 50 lakh and Rs 5 crore. Its WolfSight is a rugged weapon sight tailored for infantry units, while Gun Sight has night-vision capabilities. Its clients include the Indian Army, Gujarat Police and Indian Railways.What has given an impetus to defence startups have been the recent changes in government policies, including emphasis on indigenisation of production and more weapon procurement from private companies.For instance, it was in 2016, when the government came out with the Defence Procurement Procedure—which encouraged indigenisation and reduced import dependency—that Shah decided to found Optimized Electrotech after handing over his former company, which worked in the space sector and collaborated closely with the Indian Space Research Organisation, to a shareholder.113771722FUNDING NEEDEDWhile defence startups are preparing for future wars, they are battling concerns of their own. The foremost among them are whether they can secure consistent funding and scale up.According to Tracxn, which tracks startup funding, India’s defence-tech industry has attracted $184 million in total equity funding since 2020, with top beneficiaries being NRT, IdeaForge, Garuda Aerospace, Tonbo Imaging and Axio. This is miniscule.A single quick commerce startup, Zepto, raised $1 billion, or 5.5 times more, in the current year alone. Defence startups’ association with the government is often a hindrance for funding.Shah of Optimized Electrotech says many venture capitalists (VCs) are constrained by limited partners, often foreign investors, who are hesitant to invest in government-focused sectors, particularly defence. He says that without a steady flow of capital, there won’t be much difference between hand-to-mouth MSMEs and groundbreaking defence startups.113771727Defence startups can also have long gestation periods. Many startup founders rue that VCs often prefer investing in software as a service (SaaS) and consumer tech sectors, which offer shorter cycles and more predictable returns.Says Navneet Kaushik, a retired commander of the Indian Navy, who has founded Jamwat Ventures Angel Fund: “Defence is one of the hottest sectors right now, but there aren’t enough people funding it because they don’t understand the sector.” In March, his fund secured an initial commitment of `40 crore, with a potential to expand to `100 crore.Ajay Kumar, a former defence secretary, has also thrown his hat in the ring by launching MGF-Kavachh, an alternate investment fund focused on defence, space and deep tech. “We have closed our first deal. Threefour more deals are in the pipeline,” says Kumar, adding that the fund has raised `400 crore.While most startups are satisfied with the government’s support and funding over the past few years, some call for more reforms, such as streamlining of procurement processes through online platforms for faster disbursal.Jain of Zeus Numerix stresses on the need to overhaul weapon-testing procedures, which are constrained by regulations like the Arms Rules, 1962, under which a manufacturer is permitted to proof-test firearms only at the place of business or a factory. He suggests a more agile approach to testing, similar to the Israeli method of immediate field trials, which would significantly accelerate the process of refining and adapting weapon designs.Joshi of NRT says the crucial lesson from the wars in Ukraine and West Asia is the need for a rapid deployment of tactical assets. He thinks that requires startups. “The nimbleness of startups is attuned to this kind of requirements. They have the potential to build long-term strategic capabilities for India and its allies.”