“We were already talking to customers when the design-linked incentive (DLI) scheme was being worked out. By the time they (read: the government) were ready with the scheme, it would have been too late [for us to not work on the product],” said Shashwath TR, co-founder and the chief executive of Mindgrove Technologies.

The semiconductor-design company, backed by the likes of Peak XV Partners (formerly Sequoia Capital India) and Speciale Invest, raisedCNBC-TV18Chip startup Mindgrove raises series-A funding of $8 million, to focus on product development & distribution US$8 million in December. But the money wasn’t easy to come by, Shashwath added.

Founded in 2021, Mindgrove found early support in IIT Madras’ ShaktiIIT-MadrasShakti Processor processor programme, an open-source initiative that provides computer architecture to enable the development of other semiconductor products. It then took the firm a couple of years to secure US$2.3 million in seed money. Mindgrove spent the next several months talking and educating venture firms about its business, the CEO told The Ken over a late-afternoon video call.

In the meantime, it successfully taped out its first System on Chip (SoC) in May 2024 without the government incentiveMinistry of Electronics and Information TechnologyDesign Linked Incentive (DLI) Scheme. “We just had to go out on a limb and get it done ourselves,” he added.

Mindgrove is just one of the 117 semiconductor-design companies based in India. Nearly 93 of that lot are in active business, per market-research firm Tracxn. This, in addition to  global capability centres that have semiconductor-design operations in the country. Yet, the ticket size of funding available for the industry is small, compared to the mammoth cheques that semiconductor-manufacturing companies have seen.

Why look further? The DLI scheme itself has an allocationMoneycontrolChip design sops may extend to large Indian firms, but DLI 2.0 unlikely to cover foreign MNCs of just about Rs 1,000 crore—a drop in the total Rs 76,000 crore (US$10 billion when announced in 2022) up for grabs.