There is no doubt that India has transformed itself digitally over the last decade. The technology startup, Deep Tech ecosystem has experienced rapid expansion. The question is, ‘Where does that leave Indian tech entrepreneurs, investors, and corporates?’ Deep technologies that will be at the heart of the next wave of information disruption have emerged as a result of the ongoing technological revolution.
It’s also the next big thing that corporations and venture capitalists want. So, the question now is whether DeepTech startups are taking over commercial applications that were previously led by institutions, corporations, and governments. Let’s start with an explanation of what DeepTech is.
Deeptech, in its broadest sense, refers to technology and innovation with the potential to disrupt and transform the world, as well as have a significant impact on society. Entrepreneurs in the software/hardware space are developing new business models based on recent technological advances in areas such as artificial intelligence (AI), machine learning (ML), big data, augmented reality (AR) / virtual reality (VR), blockchain, industry 4.0, robotics, cyber security, the internet of things (IoT), and others.
When used properly, these technologies and associated intellectual property (IP) can create significant entry barriers for any startup, giving them a competitive advantage. Deeptech is finding real-world applications in areas such as disease research, IoT sensors with analytics to increase agricultural yield, smarter credit decisions in finance, and the development of clean energy solutions.
The allure of DeepTech businesses is well known among investors. In recent years, investment firms have been at the forefront of identifying and supporting start-ups focused on drones and robotics, Agritech, cybersecurity, and API-driven businesses. DeepTech companies with high scalability and commercial viability include:
BurnCal’s computer vision-based fitness platform for engagement between yourself and the coach.
Accio Robotics is an automation company for solving material handling problems.
A growing video Deep Tech ecosystem is Datasutram, an AI-based platform that provides location-based data intelligence ai.
DeepTech’s challenges stem from the complexities of the technology commercialization process, and they can be classified into three categories: a lengthy timeline, a lack of social and physical infrastructure, and a lack of finance.
DeepTech entrepreneurs and investors typically see the world through one of three lenses:
- Science and technology (e.g. quantum computing)
- Sector (for example, advanced manufacturing)
- Issue (e.g. cure skin cancer)
- Grand Challenges (for example, clean energy/climate change)
What Makes Deep Tech Unique?
It’s all based on science! It is the result of research and development (R&D). It takes a scientific discovery or breakthrough and builds on it. A/B testing features and phrases aren’t enough for DeepTech startups looking for product-market fit. It means running iterative experiments with the technology and applying it to real-world scenarios, as well as navigating the various scientific fields and intellectual property that may be driving it. DeepTech has longer gestation periods as a result of this. Depending on the innovation, it could take months to decades for the technology to be ready for commercialization.
The Birth of the Indian DeepTech Ecosystem:
With a young population, improved connectivity, the emergence of enterprise companies, and startups developing deep technology solutions, India has a unique vantage point. Using deep technology to boost growth in healthcare, education, industrial and manufacturing, and other areas has become a requirement rather than an option. India is quickly gaining prominence as the next DeepTech hub.
The advantage of DeepTech solutions is their ability to serve as the foundation for future industries that emerging markets like India require. Institutional investors are well-positioned to lead the way in DeepTech by multiplying capital. This is especially true for growth-stage companies after the majority of scientific risks have been mitigated and the initial product-market fit has been achieved in developed economies.
Such early-stage startups can benefit from collaborations with corporations and startup accelerators. This approach, spearheaded by Startup India and Niti Aayog, is exemplified by accelerators and incubators under the Atal Innovation Mission and the Department of Science and Technology.
Venture capital investments in R&D-intensive startups, as well as specialized fund investments, can help the Indian DeepTech ecosystem grow and bring more sustainable solutions to the market.
Clearly, a new Indian DeepTech ecosystem is emerging, with significant implications for all stakeholders, particularly companies, investors, and startups. Investors are driving the necessary capital force into these businesses. The reason is simple: early-stage companies in the space require more time and capital to bring their products to market, but more importantly, for the first time, corporate and venture capital firms are warming up to making long-term, significant bets on new and untested technologies.
DeepTech Startup Funding
Certain companies, such as Drones & Robotics, Agritech, CyberSecurity, and API-led companies, are at the forefront of identifying and funding high-growth startups in a variety of industries. These funds seek entrepreneurs who are attempting to solve problems that have previously been unsolvable due to technological or engineering limitations.
The emergence of a cohesive Deep Tech ecosystem is one of the reasons why these DeepTech companies are being built in India today. The availability of talent and investors willing to back these startups is one factor enabling their growth.
The Next Big Wave: The Sector Shift
India has the world’s fifth-largest nominal GDP and third-largest purchasing power parity economy (PPP). We also aim to have a thriving start-up Deep Tech ecosystem and are on track to have the largest workforce in the world by 2027. To boost economic growth, India must improve in areas such as business governance, healthcare, and education, and deep technology will play a significant role in transforming these areas.
With broadband availability and smartphone adoption in every corner of the country, India has a significant advantage. A smartphone with a ubiquitous data connection can function as a bank card, provide education for children, and provide healthcare to the average Indian citizen. Furthermore, current agricultural reforms combined with appropriate deep technology use cases can propel India’s real GDP growth.
Availability of a large engineering talent pool supported by the entire IIT, BITS, IIM, IIIT, IISc ecosystem, senior industry leaders or second-time founders starting new ventures, and regulatory support/liberalization in terms of active policy-making and capital availability are a few other factors that have contributed to the growth of the deep tech ecosystem in India.
While India has always been regarded as having some of the best IT talents in the world (particularly in the services sector), we are now witnessing a shift in which young graduates from prestigious academic institutions are gravitating toward technology IP and innovation-based entrepreneurship, providing a boost to deep tech startups.
Deep tech, as a relatively new sector, is not as well understood. There is a general lack of understanding in the industry about the far-reaching impact or effect it could have on the overall picture. As a result, companies that use deep tech in their products may have a more difficult time raising capital than their more widely known counterparts engaged in B2C e-commerce, aggregator, or app-based business models.
Furthermore, India as a target market is small and unscalable for deep technology enterprise solutions. Small and medium-sized businesses in India have a limited appetite for paying for software, and they frequently overlook the total cost of ownership as a key metric when evaluating technological adaptation. However, with the increased emphasis on automation and digitization acting as a tailwind for economic recovery, we anticipate that these challenges will soon turn into opportunities for deep tech startups.
We see no reason why India can’t produce some world-class deep tech companies in the next five years if Indian deep tech startups receive good support from local industry titans, favorable government policies, and timely availability of capital. We believe the pandemic has created an ideal environment for this to happen faster.