Startups: India’s next big bet on pharma innovation?
While India’s pharma startups can resolve scientific and systemic blind spots, funding remains the missing link blocking scalable impact, finds Neha Aathavale
While established pharma companies focus on strategy and scale, pharma-focused startups in India are quietly laying their groundwork. Not yet driven by scale, but certainly by possibility. These early-stage ventures are doing the work that bigger players sometimes overlook: filling out the missing parts of India’s pharma jigsaw.
Rather than positioning themselves as challengers to big pharma companies, pharma startups are emerging as its R&D scouts; de-risking early innovation, translating academic research into viable therapies, and plugging capability gaps in areas like drug delivery, repurposing, and AI-led discovery. With risk-tolerant capital cautiously entering the fold, public schemes nudging R&D beyond academia, and large pharma firms showing interest in early-stage partnerships, the foundations are being laid. Can India now build the kind of patient, high-stakes startup ecosystem pharma innovation needs; before this quiet ambition loses steam?
Numbers say it all
The Indian pharma startup ecosystem is grappling with a pronounced funding downturn. “The Indian pharma space witnessed its peak funding in 2018, with a total of $399M raised. Since then, the industry has experienced a declining trend,” says Neha Singh, Co-founder of Tracxn. As of May 31, 2025, total funding stands at $25.3 million—down 75 per cent and 52 per cent compared to $101 million and $53.1 million raised during the same period in 2024 and 2023, respectively.
Singh attributes this decline to a mix of global and local challenges, “The slowdown is likely driven by a mix of global pricing pressures, regulatory shifts, and changing export dynamics, including stricter scrutiny of pharmaceutical exports from India and adjustments in domestic drug pricing policies.” She adds that policy developments in key export markets, aimed at reducing drug costs, have “further intensified the challenges” for Indian pharma players; making investors more cautious.
Yet, May 2025 offered some respite. Funding that month hit the year’s highest, marking an 11 per cent increase over May 2024. This was largely due to a $25M Series C round by Pharmazz, a clinical-stage company developing critical care medicines. Another deal came from Exsure, which raised $347K in seed funding for its nano drug delivery platform targeting cancer.
While aggregate numbers remain modest, Singh emphasised that such deals signal India’s continued relevance in global pharma innovation, “Despite recent headwinds, the sector’s ability to attract substantial investments in cutting-edge areas highlights its underlying strength and the continued global relevance of Indian pharma innovation,” Singh adds.
“The Indian pharma space witnessed its peak funding in 2018, with a total of $399M raised. Since then, the industry has experienced a declining trend.”
Sagar Pawar, Partner & Lead, Lifesciences & Medical Devices, Deal Advisory – M&A Consulting at KPMG India, echoed the cautious optimism, “the Indian life sciences startup ecosystem attracted approximately $307 Mn in funding in 2024, marking a 36 per cent increase over 2023.” This growth, he says, reflects “sustained investor confidence in the sector’s innovation trajectory.” Pawar points to strong momentum in three areas: diagnostics and POC testing, biopharma ventures, and AI-powered imaging and screening in medtech. “This is driven by the growing demand for personalised medicine and tech-enabled healthcare solutions.”
However, the size and scale of venture capital deals in India still lag behind global counterparts. “The VC funding landscape for Indian pharmaceutical startups has been notably smaller in scale compared to their counterparts in western markets such as the US and the UK, as well as regional peers like China,” says Aurojyoti Bose, Lead Analyst at GlobalData. “India did not see many VC deals in 2025 so far,” he notes, and the ones that did happen lacked the high-value transactions common in the West.
Bose points out that “the Indian pharmaceutical market is characterised by a focus on cost-effective production rather than high-value innovation,” but believes this may shift as Indian firms boost their R&D capabilities.
Encouragingly, some investors are doubling down. “Mumbai Angels has invested in Mestastop Solutions, a firm focusing on cancer metastasis drug discovery, twice,” Bose highlights; once in 2020 and again in 2024, indicating “ongoing investor confidence.”
Srikanth Mahadevan, Director, Deloitte India, notes that the investment climate is gradually improving. “Private venture capital was slow to embrace this space – historically, only a small fraction of India’s 10,000+ biotech startups secured funding,” he says. But momentum is building; in May 2025 alone, Indian pharma startups raised around $254M, including one early-stage company securing over $150M in a single round. “This uptick underscores that institutional investors and VCs are actively exploring pharma opportunities now.”
Offering the pharma industry’s view, Sudarshan Jain, Secretary General, Indian Pharmaceutical Alliance (IPA) states, “Globally, 2024 has been a relatively encouraging year for pharma and biotech investments, particularly in sectors such as AI‑driven drug discovery.” But in India, “pharma-only startups have yet to secure sustained investor traction.” The reason? The sector’s long gestation periods and capital-intensive nature. Still, Jain acknowledges “green shoots are emerging in areas such as novel drug delivery platforms and deep‑tech R&D”, early indicators of long-term potential if the right enablers are in place.
“In India, while there is vibrant startup energy across technology and health tech, pharma-only startups have yet to secure sustained investor traction.”
Why risk capital still hesitates
Despite growing interest in pharma innovation, early-stage startups in India face a steep climb, especially when it comes to securing funding.
“Bringing a new drug or therapy to market involves navigating complex clinical trial and approval processes under agencies like the CDSCO,” says Mahadevan. “Market entry can be delayed by 2–3 years just in obtaining approvals for a novel drug.” This prolonged regulatory timeline not only slows down growth but adds significantly to costs. “Developing a new drug in India can cost upwards of ₹1,500 crore (around $200 million),” he explains, with R&D and trials consuming both time and capital. That, combined with a high failure rate (many drug candidates never make it to market), makes many investors cautious. “In contrast to quick-to-market tech startups, pharma ventures require patience and specialised expertise, so raising capital is a constant hurdle.”
Market dynamics present further complications. “Pharma startups must compete with well-established domestic and multinational companies,” says Mahadevan. Carving out space in India’s competitive generics market demands major resources and brand credibility, assets most young firms lack. Even after launching a product, startups must contend with price controls on essential drugs, which cap margins and impact profitability. “This means even a startup with an approved product might face profitability challenges due to government price controls on drugs,” he notes.
“The Indian pharmaceutical sector has not seen any significant ‘big-ticket’ VC deals in recent times, contrasting sharply with the more robust funding environment in the US, UK, and China.”
Intellectual property (IP) is another pain point. “Securing patents in India is a lengthy process—often taking five years or more,” Mahadevan adds. During that time, startups are vulnerable to having their innovations reverse-engineered or copied. “Such IP delays and the threat of reverse-engineering or counterfeiting discourage innovation.”
Beyond regulation and IP, structural challenges persist: access to efficient manufacturing, cold-chain logistics, and quality distribution is limited for smaller players. “Cutting-edge pharma R&D requires highly skilled scientists and regulatory experts, and startups must compete with big pharma companies to hire and retain this limited talent pool,” Mahadevan says.
In short, the sector’s hurdles include “long regulatory cycles, capital intensity, funding constraints, IP delays, intense competition, pricing pressure, and talent gaps.” None are insurmountable, but they demand strategic agility. “Entrepreneurs need to form strategic partnerships, tapping government grants, or focusing on niche markets to gain traction despite these barriers,” he advises.
“Investors are gravitating towards pharma startups that either push the frontier of science (new therapies, biologics, precision medicine) or innovate on process and business model (platform technologies, outsourced R&D/manufacturing, or digital efficiency tools).”
What investors are looking for
Even with the challenges, the appetite for pharma startups is growing. Particularly those innovating across the value chain with deep-tech capabilities, digital platforms, and science-first approaches.
Pawar notes a marked shift, “Investors in India’s pharma startup space are increasingly drawn to innovation across the value chain, with a strong focus on AI integration, real-time diagnostics, precision medicine, and digital therapeutics.”
He also highlights the rise of AI-as-a-service for pharma: startups are using proprietary engines and generative AI for drug discovery, lead optimisation, and molecular screening. Meanwhile, commercial pharma platforms are redefining how pharma reps engage with healthcare professionals (HCPs) through CRM-powered, data-driven tools, and a new generation of patient-facing startups is integrating digital therapeutics to manage chronic conditions.
Startups developing personalised therapies, especially those aligning with global precision medicine trends are also commanding attention. “Clinical innovation is not just a buzzword; it’s where the frontier lies,” adds Pawar.
Mahadevan underscores that biopharma innovation remains the most dominant theme, accounting for 42 per cent of all life sciences startup funding in recent years. “With an estimated $100+ billion worth of biologic drugs set to go off-patent globally by 2030, Indian startups in the biosimilars space are especially attractive,” he explains. Indian companies that can produce affordable, high-quality biosimilars are well-positioned to claim a global share. “Biosimilars in India are expected to grow at nearly 30 per cent CAGR through 2027,” notes Mahadevan, calling it one of the hottest verticals for investors.
“In summary,” Mahadevan notes, “investors are gravitating towards pharma startups that either push the frontiers of science (new therapies, biologics, precision medicine); or innovate on process and business model. These areas align with both India’s comparative advantages and global pharma trends, offering the most promise for high returns.”
Backing the breakthroughs
While investor interest in pharma innovation is clearly rising, the ecosystem still needs strong policy scaffolding to help startups translate their ideas into viable, scalable businesses.
According to Jain, one of the most immediate needs is more accessible capital; both domestic and international, including FDI, NRI funding, and cross-border venture capital. Government efforts like the Promotion of Research & Innovation in Pharma MedTech (PRIP) scheme and the newly launched Research Development and Innovation (RDI) scheme are timely and welcome. However, he notes that the current funding cap of ₹1 crore per startup under PRIP may not be sufficient. Suggests that grants in the ₹5–8 crore range would be more effective in helping startups reach critical early milestones and build investor confidence. “These are necessary to unlock subsequent rounds of funding and build investor confidence.”
“Pharma startups are increasingly becoming critical players in the broader pharmaceutical ecosystem, with strong potential to bridge key strategic gaps.”
Bridging the gap
With policy support firming up and investors gradually warming to science-driven ventures, the conversation naturally turns to the role of startups in India’s pharma ecosystem. Are they peripheral actors or could they become critical enablers of innovation?
According to Mahadevan, “pharma startups play a crucial, complementary role in India’s broader pharmaceutical ecosystem by filling innovation gaps and injecting agility into the industry.” While large pharma companies continue to dominate high-volume manufacturing and distribution, startups bring a sharper focus to untested ideas, emerging technologies, and high-risk research that big players may initially shy away from.
He adds that Indian startups often act as “innovation scouts for the industry,” working on new drug targets, AI-powered discovery tools, or advanced drug delivery systems. These ventures don’t just introduce new ideas, they often make them viable enough for scale, licensing, or acquisition. In doing so, they “significantly expand the pipeline of potential treatments that large pharma can eventually bring to market.”
However, despite this symbiotic potential, scalability remains a critical concern. Jain points out that India has “India has many essential pillars in place: world‑class scientific talent, a growing base of academic–industry partnerships, and an evolving regulatory framework.” Yet startups often struggle to scale domestically. He highlights two barriers: limited domestic risk capital and a “cultural bias against failure.” As a result, many startups register overseas to access what Jain calls “patient capital, mentorship, and global markets.”
To counter this trend, he recommends fostering a more supportive environment through policy and financial mechanisms. “Indian investors must adopt a higher‑risk, high‑reward mindset, supported by policy guarantees like the RDI scheme, targeted grants, IP protections, and public–private translational hubs.”
Mahadevan reinforces this point, acknowledging that “pharma startup investment has lagged behind healthtech, primarily due to longer development timelines, higher costs, stricter regulation, and a historically lukewarm investor ecosystem for deep science ventures.”
However momentum is building. Deloitte concludes on an optimistic note, “The good news is that this gap is starting to narrow as stakeholders recognise the immense long-term value pharma innovation can create. Investors are slowly gaining confidence as they see success stories and as government funds help de-risk early stages. Pharma entrepreneurship is inherently a long game, but with supportive trends now in motion, it may begin to catch up to the buzz of healthtech in the coming years.”
Conclusion
Together, these insights suggest that while Indian pharma startups are still finding their footing, they are well-positioned to plug innovation gaps, bring agility, and enable India’s shift up the value chain.
