Army seeks fund to protect startups from heavy losses during user trials

Pune: The Indian Army has proposed a mechanism to protect startups from severe financial losses in the event that their systems fail during user trials.The proposal, put forward by officials of the Army Design Bureau (ADB), was submitted recently to the Ministry of Defence for consideration. The move follows growing concerns that several defence startups developing niche and high-risk technologies are struggling to survive after setbacks during trial stages.
"One of the major challenges with startups is that when we ask them to demonstrate their equipment at forward locations, many lack the financial capacity to transport systems from places such as southern India to high-altitude areas. Even if a startup manages to reach the trial site, any damage during transportation becomes difficult to repair due to limited resources. A startup may succeed up to that point, but if a system—such as a drone—crashes during the actual demonstration, the entire investment is lost. For a small startup, that can mean the end of the company," said Major General CS Mann, Additional Director General, Army Design Bureau, during the Jointness Atmanirbharta and Innovation (JAI) seminar organised by Southern Command last week."At present, we do not have a formal mechanism to hand-hold or support startups through these high-risk stages. Keeping this in mind, we have proposed a Field Exploitation and Capability Acceleration Fund to address such expenditures," he added.Officials noted that many startups invest heavily in prototyping, testing and compliance to meet military specifications. When systems fail to perform as expected during trials, companies are forced to absorb the full financial loss, discouraging innovation and deterring new entrants from entering the defence sector."The idea is that wherever we find the demonstrated equipment to have operational value, we can induct limited quantities for field exploitation. Once it proves itself during this stage, we can move towards bulk procurement. At the very least, this process provides crucial support to a startup," Mann said.He added that this provision, in a moderated form, has now been included in the draft Defence Acquisition Procedure (DAP) under the category of LCCA—Low Cost Capital Assets.Senior Army officers also highlighted the need for the timely conduct of trials by Army formations."Delays in operational testing impose additional financial strain on startups, which often operate with limited capital and rely on rapid feedback cycles. In several cases, prolonged trial schedules have resulted in cost overruns and cash-flow disruptions, threatening the viability of small startups and firms," a senior Army officer said.Sources added that the Army emphasised that promoting indigenous development aligns with the broader Atmanirbhar Bharat initiative and the govt's push to reduce dependence on imports. Providing a safety net for startups, they believe, would accelerate innovation, boost industry confidence and ensure a steady pipeline of indigenous solutions for the armed forces.