February 20, 2024
The institutional enterprise capital-backed startup ecosystem in India birthed its first public itemizing within the deep expertise house in 2023 with aerial robotics agency Ideaforge, marking the regular improve in investor curiosity in high-tech innovation-focused corporations.

Deeptech is a time period for companies utilizing superior science and expertise to search out options for classy issues throughout over a dozen sectors and unfold throughout sub sectors equivalent to house expertise, electrical autos, semiconductors, and cleantech.

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“Since these companies are on the fringe of cutting-edge improvements in some ways…historic priority doesn’t align,” mentioned Shreyas Shibulal, founder and director of Micelio Mobility that funds clear mobility startups. “However we count on the capital out there for transformational deeptech companies to proceed to broaden,” he added.

Schemes such because the current Nationwide Deep Tech Startup Coverage, Inexperienced Hydrogen Mission, subsidy for clear mobility, Indian House Coverage, and Indian Semiconductor Mission mixed with numerous production-linked incentive (PLI) schemes to help innovation and manufacturing in India – apart from the exceptional curiosity in generative AI after the discharge of ChatGPT and different chatbots primarily based on massive language fashions (LLMs) – have led to vital curiosity by traders in deeptech, consultants mentioned.

The yr 2023 additionally noticed the profitable launch of lunar spacecraft Chandrayaan-3, making India the fourth nation to efficiently land on the moon and the primary to land close to its south pole.

Deeptech has a novel set of attributes.

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In cleantech, as an example, there’s a social urgency with rising considerations round local weather change.

Funding across deeptech sectors in 2023_ETTECH_2 (1)ETtech

As per Tracxn knowledge reviewed by ET, seed stage funding in semiconductors and spacetech surged to $6.9 million and $4.5 million, respectively, in 2023 from $680,366 and $3.7 million, respectively, in 2022.

Early-stage funding in spacetech went up from $111.2 million to $114.7 million throughout the identical interval, whereas it rose to $214.2 million from $195 million for EVs and in semiconductors, it continued to be within the 2022 ranges of $2.4 million.

Within the late phases of funding, nevertheless, all sectors of EVs, cleantech and general deeptech noticed deal values plummet, Tracxn knowledge confirmed.

“We’re so early right here that the info will probably be disparate, it received’t present you any broad pattern,” mentioned Vishesh Rajaram, managing associate at deeptech-focused investor Speciale Make investments. “…the perception in deeptech right here is within the micro and never the macro. It’s all bottoms up method in alternatives right here,” he mentioned.

Rajaram expects investments to proceed to go up in semiconductors and synthetic intelligence startups since there’s energetic coverage making taking place in these areas. Within the spacetech sector, he mentioned, the worth will improve however not the quantity. “In local weather tech, there was a good circulate of capital throughout its areas however nuanced performs round decarbonisation and carbon financing will entice investments,” he mentioned.

He bucketed corporations within the deeptech house into era I, II and III.

“Gen I of a sector is when it doesn’t do properly, gen II is when it does properly, and gen III is when it matures,” Rajaram mentioned, including that the nation is gen II in spacetech, local weather tech and semiconductors. “You will note massive numbers taking part in in gen III whilst deal quantity goes down,” he mentioned.

Buyers additionally laid a powerful emphasis on indigenisation of important applied sciences equivalent to semiconductors will probably be a defining theme inside deeptech subsequent yr.

Additionally learn | 2023 12 months in Evaluation: Secondary rounds might headline deal circulate at startups subsequent yr too

Widening curiosity

Sector-agnostic funds, too, are spending extra time learning these area of interest areas now as a result of early indicators of success equivalent to public programmes and subsidies have began to point out.

Peak XV Companions made investments into corporations equivalent to Mindgrove and InCore within the semiconductors house, Newtrace within the inexperienced hydrogen house, and in spacetech startup Digantara. Startups on this house additionally led the ninth cohort of the agency’s accelerator programme Surge.

“The enterprise purposes in lots of of those companies obtained more and more clear,” mentioned Shailesh Lakhani, managing director of Peak XV. “As a gaggle, as we see extra of those corporations, we get extra snug with what is feasible. Constructing a satellite tv for pc was very tough and only some folks may do it 10 years in the past. That has modified now,” he instructed ET.

Arpit Agarwal, associate at early-stage investor Blume Ventures, mentioned with successes within the ecosystem, extra entrepreneurs have their ambitions fuelled, and traders have “turn out to be extra enthusiastic”.

“An Ideaforge in all probability goes to snowball to numerous funding in defence corporations in 2024. Everyone seems to be now seeing a path to achievement in deeptech,” he mentioned.

Additionally learn | 2023 12 months in Evaluation: Meet the executives who donned the founder hat

Early days

Lakhani of Peak XV mentioned numerous credit score and respect ought to be given to early incubators and traders who believed in these classes early on, when these areas have been a lot much less confirmed.

Priyanka Chopra, chief working officer and managing associate of CIIE.Co, an IIM Ahmedabad startup accelerator, mentioned, “As a result of we are available in a lot early the place there isn’t a viability of the product, valuations should not targeted on any income multiples. However even later, we have now seen great valuation bump-ups with no single rupee coming in as income due to the guarantees behind the expertise.”

CIIE.Co has invested in corporations equivalent to Ideaforge – which later raised funds from Qualcomm Ventures and Celesta Capital as properly – and spacetech startup Agnikul.

Nonetheless, the concentrate on a transparent line of commercialisation stayed distinct whilst early iterations round expertise or product-market-fit might fail.

“The business conversations round spacetech-like alternatives are substantial… These should not your $5,000-10,000 initiatives, there are far more substantial greenback worth contracts,” Peak XV’s Lakhani mentioned.

Buyers are optimistic about funding India’s “gen III” startups in deeptech throughout 2024 – at a time when the extra glamorous cousins in ecommerce, fintech and the likes bear a market correction.