India DLI Scheme: 14 of 24 Startups Secure Institutional Venture Capital

India's DLI Scheme Proves Its Worth: 14 of 24 Chip Startups Attract Institutional VC

A comprehensive analysis of India's Design Linked Incentive (DLI) programme reveals that 14 of the 24 approved semiconductor design startups have successfully raised institutional venture capital funding, together drawing over 100.8 million dollars in private investment since the scheme's launch under the India Semiconductor Mission in 2021. The data positions the DLI programme as one of India's most effective deeptech policy instruments, demonstrating a clear and measurable pathway from government-backed incubation to sustainable private funding for chip design companies.

What the DLI Scheme Provides

The Design Linked Incentive scheme provides semiconductor and display design companies with financial incentives structured around product development milestones, including product deployment incentives of up to six percent of net sales for five years, design infrastructure support of up to 50 percent of eligible expenditure, and tape-out support of up to 75 percent of non-recurring engineering costs up to a ceiling of Rs 15 crore per application. These incentives are designed to reduce the high upfront capital requirements of chip design and tape-out activities, which have historically made it difficult for Indian startups to reach silicon-level proof of concept without international partnerships or foreign capital.

Top VC Recipients from the DLI Cohort

Among the 14 DLI-backed companies that have raised institutional VC, four stand out as having attracted the most significant capital: Mindgrove Technologies with funding from Peak XV Partners and Speciale Invest for its RISC-V MCU platform; Morphing Machines with Rs 80 crore Series A from Hero Enterprise Partner Ventures, Colossa Ventures, and Navam Capital; Netrasemi, focused on energy-efficient AI processor IP; and C2i Semiconductors, which is developing secure processing solutions for defence and critical infrastructure. Together these four companies account for approximately 56 percent of all VC raised by the DLI cohort, reflecting investor concentration in a small group of high-conviction bets within the Indian chip startup ecosystem.

Conversion Rate and Policy Implications

A 58 percent VC conversion rate for DLI-approved companies is considered exceptionally high by deeptech startup standards, where the typical graduation rate from government support to private capital is closer to 20 to 30 percent globally. Policy analysts suggest that the DLI programme's milestone-based disbursement structure, combined with MeitY's active role in connecting startups with investors and industry partners, has created a more effective de-risking environment than most comparable programmes in South Korea, Germany, or the United States. The programme also benefited from timing: India's DLI cohort emerged just as global investors began actively seeking geographic diversification in semiconductor design bets following US-China tensions over chip supply chains.

Road Ahead for the DLI Programme

With ISM 2.0 now being discussed at the policy level, industry stakeholders are calling for an expanded DLI cohort to include up to 100 companies across semiconductor, display, and power electronics design categories. The success of the current cohort in attracting private capital has strengthened the case for a larger programme budget and broader eligibility criteria that could capture India's growing cluster of fabless design companies in Bengaluru, Hyderabad, Pune, and Noida. Observers expect announcements on DLI 2.0 parameters at SEMICON India 2026 in September, where MeitY and the India Semiconductor Mission are scheduled to present an updated roadmap for India's chip design ecosystem through 2030.