But that is hardly surprising.
SpaceX is not just another space company. Its services, from launches to communication infrastructure, are used by countries for critical national security functions, in peace and war. From Starlink becoming critical for Ukraine defending itself against Russia, to US defence contracts, which involve Starshield and spy satellite launches, a plethora of use cases underline the strategic significance of what is likely Musk’s most consequential company.
The SpaceX case also highlights something else. Space is no longer just about the romance of the curious mind wondering what lies beyond. It is likely a key battlefield of tomorrow, one where space mining jostles with spy satellites as humanity takes borders and conflicts into outer space.
Space underpins communications, navigation, intelligence-gathering and military ops. As countries become increasingly dependent on new hardware like drones during armed conflict, space is also becoming strategically critical, and that is not lost on governments around the world, including India. Having strategic capabilities in outer space is no longer good-to-have. It is a must-have.
As SpaceX has shown, these capabilities aren’t always easily available within national space agencies, which dominated space exploration for several generations. Combining the breadth of problem-solving enabled by private capital is critical for them to cater to the spectrum of possibilities that have emerged.
ET BureauThe good news: India is taking baby steps in that direction.
SPACE REFLECTING EARTH Kari A Bingen, senior fellow, defense and security department at the Center for Strategic and International Studies, Washington, DC, has argued that “modern conflicts are normalising the idea that space—like land, sea, air, and cyber—is a domain to be exploited, attacked, and defended in wartime”.
She says the war in Ukraine marked a turning point in the role of space in warfare, with Kyiv marshalling a range of space-based tools for communications, surveillance, targeting and information-sharing, many provided by commercial actors.
According to consulting firm Novaspace, defence and government demand in the global satellite communications market touched $5 billion in 2025. In its filing, SpaceX revealed that this estimate of the government communications market includes only publicly disclosed programmes and budgets and not classified missions or other restricted uses.
As Bingen points out in a paper, what Ukraine has demonstrated is just how even a “militarily outmatched nation—with little indigenous space infrastructure—can leverage space capabilities to gain battlefield advantage”. That has led many to call the Ukraine war the “first commercial space war”.
What has also changed is the belief that nations need to have sovereign control over supply chains, especially in defence.
That has resulted in a global rearmament drive. The UN, quoting the Stockholm International Peace Research Institute, says $2.7 trillion was spent on militaries in 2024, a 9% jump from the previous year. They reckon that if current trends persist, global military spending could rise to $4.7-6.6 trillion by 2035.
INDIA’S PLAY
It is in this context that the Indian government’s outreach to space startups makes sense. Much of this is housed under the Innovations for Defence Excellence (iDEX) scheme, which is promoted by the Defence Innovation Organisation that is under the Department of Defence Production, Ministry of Defence.
Just in the past 18 months, several projects have been awarded to India’s spacetech startups.
Take Pixxel. Last year, it signed an agreement with iDEX, which “supports the development of advanced Hyperspectral and MWIR (Mid-Wave Infrared) payloads, tailored for the Indian Air Force”. Before this, it was awarded a satellite grant under the Mission DefSpace Challenge to develop miniaturised multi-payload satellites with electro-optical, infrared, synthetic aperture radar and hyperspectral capabilities for the Indian Air Force.
These contracts have been critical for startups in their monetisation journey. Pixxel founder Awais Ahmed says, “Currently, national security-related programmes account for roughly 60-70% of current revenues across certain parts of the company.”
Bengaluru-based space surveillance and intelligence company Digantara Industries too has a thriving defence business. Its founder Anirudh Sharma says nearly 80% of its revenues currently come from defence-related contracts. He doesn’t talk much about the nature of these contracts, but considering the company had won the US-India Satellite Tracking Challenge, it is clear they are focusing on this business.
Others riding the wave include earth observation company GalaxEye Space, which has signed an iDEX contract to develop a multi-sensor fusion system for Air Force satellites.
A questionnaire sent to iDEX did not elicit a response.
Interestingly, most of these companies were not banking on defence or government contracts when they drew up their initial business plans, something that had made fundraising difficult in their early years. Until about 2020, India’s space sector was dominated by Isro and had very limited direct engagement with startups or military users.
BUSINESS CASE
But the current shift in revenue flow is reflected in funding sentiment as well. It isn’t just specialised deeptech funds that are deploying money in space startups these days. Bigger names like Peak XV Partners, GIC, Reliance, Blume Ventures and Lightspeed have all taken an interest in them in the last couple of years.
So much so that the press release for Digantara’s latest round of funding clearly states that it is squarely targeting the defence market by developing “sovereign hardware, software and intelligence systems that strengthen national security and strategic autonomy”.
All of this has meant that the funding environment has picked up for many of these startups. That is something that makes Rahul Seth, founder of VC firm Industrial47, also a former army man and an early backer of both Digantara and Pixxel, beam with pride.
ISRAEL ROUTE
For startups, this shift opens a unique opportunity to get their tech proven by defence customers, a well-worn path taken by many Israeli defence companies. In that country, defence startups are often incubated inside the military, and by the time their products hit the broader market, their tech is guaranteed to have been deeply tested, which makes it an easy sell for startups that can grow into multi-billion-dollar companies.
That kind of a curve is what companies like Pixxel seem to be hoping for. Ahmed says that over the longer term, they “expect that mix to become more balanced as commercial adoption of hyperspectral data accelerates across sectors such as agriculture, energy, mining, environment and climate”. He estimates that national security-related work will account for roughly 40-50% of the business alongside a commercial customer base.
WHAT NEXT?
The startups are clear that some policy moves could help the shift reach a higher gear. Sharma says it is critical to have government support during the development journey and not after products are developed. “One big difference between us and America is that in America, developmental contracts are awarded. In India, things are improving. But beyond one or two special cases, we don’t do that,” he says.
He points to how the US establishment supported SpaceX with contracts in its early days to illustrate how such support can help develop newer technologies.
Meanwhile, Ahmed at Pixxel reckons that going forward, two changes could have an outsized impact. “Faster procurement and contracting cycles would allow emerging companies to invest and scale with greater confidence. And for highly strategic and technology-intensive programmes, procurement frameworks should look beyond upfront cost and account for technical capability, innovation, performance, scalability and long-term strategic value.”
Such moves, he says, “would help ensure that critical national capabilities are built around the best available technology”.
It is also clear that the push needs to be broad-based further. While contracts have been coming in for bigger startups, the path ahead for many defence and space startups is still unclear.
As an investor says on condition of anonymity, unlike software startups, spacetech has a small pool of potential customers—mainly government agencies, defence firms and a few large industrial groups. This raises questions about how quickly these can grow and build sustainable businesses.
Most startups in the sector are still pre-revenue and focused on developing or testing their products. Only a handful have completed their products and secured contracts with defence companies or government agencies. Industry executives say consolidation is likely over time, with larger groups emerging as potential acquirers of promising startups. However, such deals may not always meet founders’ valuation expectations.
What is clear is that while it is still early days, government collaboration is reshaping the future of some of India’s spacetech startups, and eventually this has the power to reshape India’s strategic choices.
