A deep-tech founder once noted that Chennai is an excellent place to experiment with ideas and build products at the intersection of science and hardware, thanks to cutting-edge research institutes and the ability to get things physically made. However, the same cannot be said for scaling and taking prototypes to market. This is evident from the exodus of several notable deep-tech startups that began in Tamil Nadu, particularly within the IIT Madras ecosystem. Many did not leave immediately upon breaking out. A founder of a unicorn mentioned that being away from the startup conferences and venture capitalists of cities like Bengaluru helped build products with conviction in the early stages. The company later moved out at the insistence of its lead investors, though the founder acknowledged that it also made sense for scouting talent.
Challenges in Scaling
Vish Sahasranamam, co-founder and CEO of Forge Innovation and Ventures and a key figure in the defence innovation programme iDEX, says Tamil Nadu suffers from lower talent density, not just in engineering but also in go-to-market and operations, which pushes startups out. “When startups are exposed to capital and customers in Bengaluru and Pune, they want to move out for justifiable reasons. While the private sector and educational institutions have a role to play, the government should do the heavy lifting to create initial momentum.”
Need for Centralized Innovation Mission
Sahasranamam emphasizes the need to stop operating in isolated silos where IT and MSME departments manage their own programs with fragmented budgets. “The government must create a central innovation mission, directly under the Chief Minister, to establish a common umbrella of governance. Splitting a ₹500 crore budget across five different centres dilutes leadership and prevents reaching critical mass. To generate outsized, non-linear returns, the government must concentrate its capital, find the right experts, give them complete autonomy, back them with serious funding, and let them run it without questions asked.”
Role of Industrial Majors
He also suggests that large industrial majors should work with startups to implement pilot projects, make strategic investments, step in as actual manufacturing partners, or create corporate venture studios. “By coupling a startup's ‘zero to one’ innovation with an industrial partner's ‘ten to one hundred’ production scale and brand equity, we can fix the entire journey from a lab project to a massive, full-stack industrial venture.”
Risk Aversion and Capital Shortage
Bluehill VC managing partners Manu Iyer and Sridhar P state that Tamil Nadu's main weakness is not talent or infrastructure but low local appetite for risk and a shortage of early-stage capital. “In Bengaluru, successful founders and angels routinely write small early checks for many startups. In Tamil Nadu, investors are seen as conservative, preferring bonds and basic equity, which limits early-stage funding and discourages entrepreneurs. Without capital, entrepreneurs do not take risks, and without startups and successes, capital does not come, creating a negative feedback loop.” They added that startup quality and deal flow have declined compared to six to eight years ago. Many places that lacked deep-tech incubators a decade ago now have them, so founders no longer feel compelled to be in Tamil Nadu.
Opportunities Ahead
Ashok Jhunjhunwala, chairman of the ITEL foundation and a key architect of the IIT Madras Research Park, says that to maintain its lead and multiply success, Tamil Nadu needs to align policies, sharpen focus, and put the right people in place. “Tamil Nadu's hype from the industry is less compared to other hubs, which is helpful. We started in the 1980s, and it took years of trial and error to get industry, academia, and research to work together before becoming successful. I believe the research park model can be replicated, and we are working with various institutions, including non-IITs in Tamil Nadu and elsewhere.”
Recent stock market runs in South Korea and Taiwan show that tech innovation, state backing, and manufacturing can capture enormous value faster than almost any other sector. Policy tailwinds, including the union government's RDI fund, and early deep-tech ventures' progress on commercialization, are adding to the momentum. Having largely missed the consumer and tech startup wave of the mobile era, Tamil Nadu could regain ground in the new economy if it leverages its strengths, mobilizes resources, and excels in execution.
