Semiconductor ambitions of India depend on more than building factories and attracting large investments. For startups developing their own chips, the challenge is also finding investors willing to stay through a long and expensive journey from an idea to a product that customers will buy.
Srini Chinamilli, co-founder and CEO of Tessolve, a Hero Electronix venture agrees with this observation. Speaking to Financial Express Online, Chinamilli said funding needs to match the long development cycles and technical risks involved in turning a chip design into a commercial product.
“What India needs is a patient capital ecosystem that stays with companies through the full journey, from the first design and tape-out, through silicon validation and productisation, all the way to commercial scale,” he told The Financial Express.
The argument concerns startups developing their own chip products, which must pay for engineering, design tools, manufacturing and testing before they can establish a market. Tessolve provides semiconductor engineering services, including chip design and testing.
The call for longer-term capital comes as India expands support for domestic chip design through the India Semiconductor Mission (ISM). The government’s Semicon 2.0 design framework provides for milestone-linked seed funding and equity co-investment, alongside shared access to design tools, prototype fabrication and post-silicon validation services.
Why chip startups need patient funding
A key challenge for chip-product startups is the amount of development spending required before revenue. A company may have an engineering team and a promising design but still need to fund intellectual property (IP) licences, electronic design automation (EDA) tools, verification and prototype manufacturing before testing a physical chip.
Tape-out is the stage at which the finalised design is sent to a foundry for fabrication. Even at mature process nodes, producing a prototype can require substantial investment. Packaging, testing, debugging, silicon validation and reliability assessments add further requirements on the path to a product that customers can qualify and buy.
A design problem that requires another fabrication cycle can add cost and delay, Chinamilli said.
“The biggest difference with semiconductors is that the capital requirement comes very early, often long before there is any revenue,” Chinamilli said. “If a software product needs another iteration, you can usually make that change relatively quickly. In semiconductors, another iteration can mean another fabrication cycle, with a significant cost and several months added to the programme.”
His concern is the ability of investors to support those development cycles and possible setbacks before a startup reaches commercial scale.
Govt, specialist funds and industrial groups
Chinamilli called for several sources of funding, with government support at the earliest stages, specialist investors as technologies mature and strategic or industrial capital to help companies scale.
“Government support can play an important role at the earliest and riskiest stage, helping de-risk the initial investment and encouraging private capital to participate,” he said.
He also saw an opportunity for domestic venture capital and private equity funds to develop deeper semiconductor expertise. Investors need to understand the steps between completing a design, producing the first chips, validating their performance and securing customer acceptance, he said.
Large Indian industrial groups could contribute through longer investment horizons, market access and, in some cases, manufacturing and supply-chain capabilities, he said.
“I also see a particularly important role for large domestic industrial groups,” he said. “Their ability to take a longer-term view can be valuable in an industry where a product may take several years to move from architecture to commercial scale.”
Chinamilli also pointed to strategic investment from global semiconductor companies, equipment makers and foundries as a potential source of technical support and connections to wider supply chains.
“Patient capital gives entrepreneurs the ability to make the right technical decisions rather than being driven only by short-term funding cycles,” he added.
He said investor interest was improving. “We are already seeing more investors willing to make these longer-term bets as they understand the semiconductor opportunity better,” Chinamilli said. “Successful semiconductor businesses can create significant value, but they need time and sustained investment to get there.”
| Aspect | Key point from Tessolve CEO |
|---|---|
| Core need | “Patient capital” that stays with startups from first design and tape-out through silicon validation, productisation and commercial scale. |
| Why semiconductors are different | Capital is required very early, often long before any revenue; a failed iteration can mean another costly fabrication cycle and several months of delay. |
| Funding mix proposed | Government support at the earliest, riskiest stage; domestic VC/PE with semiconductor expertise as technology matures; large Indian industrial groups for long-term capital, market access and supply-chain links; strategic investment from global chip firms, equipment makers and foundries. |
| Role of shared infrastructure | Startups need access to prototyping, fabrication, packaging, test, validation and productisation services; shared facilities can cut time and cost to market, especially for fabless designers. |
| Investor behaviour needed | Rigorous technical and commercial evaluation, but faster funding decisions once a credible proposition is shown, so engineering teams and cash runways are not eroded by long waits. |
| Risk and ecosystem payoff | Not every chip design or tape-out will succeed; failures are expected in a deep-tech ecosystem, but successful ventures create IP, talent and engineering expertise that support the next generation of semiconductor businesses. |
Shared infrastructure can lower costs
Funding needs to be accompanied by access to the facilities and services required to develop and qualify a chip, Chinamilli said.
“A startup also needs access to the infrastructure that turns an idea into a product—prototyping, fabrication, packaging, test, validation and productisation,” he said. “If these capabilities are accessible within the ecosystem, startups can reduce both the time and the cost of getting to market.”
Access to shared tools and services is particularly relevant to fabless startups, which design chips and outsource their manufacture. It can help them avoid duplicating expensive facilities and obtain support at different stages of development.
The funding and infrastructure requirements are connected as paying for fabrication alone does not cover the subsequent work needed to test a chip and prepare it for customers. Chinamilli said investors needed to support companies through that wider process.
“If the capital stays with the entrepreneur through the full journey, from design and tape-out to first silicon and commercial scale, we have a much better chance of creating semiconductor companies that own their products and IP and can compete globally,” he said.
Faster decisions alongside technical scrutiny
Chinamilli said funding decisions must combine technical and commercial scrutiny with an understanding of a startup’s cash needs. Engineering teams and tool licences continue to cost money while a company waits for investment.
“Speed matters alongside discipline,” Chinamilli said. “Semiconductor investments need rigorous technical and commercial evaluation, but once a company has demonstrated a credible proposition, the funding process has to move fast enough to match the pace of engineering.”
“A startup cannot spend months waiting for a decision while its engineering team and cash runway continue to move,” he added.
Accounting for the risk of failure
Not every semiconductor architecture, product strategy or tape-out will succeed. A chip may fail to meet performance, power or reliability targets, while manufacturing yields or customer acceptance can also present hurdles.
“There will inevitably be companies that don’t make it,” Chinamilli said. “That is part of building a deep-technology ecosystem.”
Chinamilli argued that successful ventures could also develop skills and expertise that benefit other businesses.
“The companies that do succeed can create much more than financial returns,” he said. “They create IP, talent, engineering expertise and experience that can support the next generation of semiconductor businesses.”