Get All Access for $5/mo

Why DeepTech Has Become the Hot Target For Investors There is a clear focus on developing strong intellectual property for creating first-of-its-kind technology innovations

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Pexels

India has gone through three distinct waves in the last three decades of its startup evolution: IT and services led in the 1990s and 2000s, consumer and digitization led in the last decade and currently morphing rapidly towards deeptech and Innovation led product wave. India, once viewed as only a chop-shop where cost-arbitrage based business models dominated and consumer Internet models were copied and adapted en masse from the west, is currently paving its way to be an innovation-first nation.

Who are these innovation and deeptech startups and where are they focused on? Why have they become central to the conversation of both building for India and building from India for the world?

We divide up the broad Innovation and deeptech startup landscape into four broad themes: deepscience, hardtech (made easy in India), advanced software and AI, and home-grown software stacks.

DeepScience startups evolve from years of core technology development and require a substantially longer time for commercialization. While the culture and practice of founding such startups from research institutions and universities have been paramount in the US startup ecosystem aided by grants such as NSF and DARPA, it is still at its nascent phase in India. This category involves new drug molecules, novel materials, innovative batteries, novel processes, quantum computers, etc. Several efforts are also underway via university incubators, government initiatives and department of biotechnology grants to foster this ecosystem.

The second category is hardware-led technology solutions being developed more efficiently from India. ISRO has led the way by making cutting-edge new space related technologies at much lower price points thereby proving that resource constrained nations with human potential can deliver high quality globally competitive innovations. Bellatrix, developing green propellants, Agnikul with their 3D-printed modular rocket engines, several advanced robotics companies and Detect Technologies operating in the area of industrial AI and machine vision are shining examples of such solutions developed in India.

The third category of advanced software and artificial intelligence (AI) is where most of the activity we see today, built on a large affordable talent base and decades of software experience. Plethora of application companies are innovating on AI models, building on the treasure trove of data, some building complex and unique data sets eliminating biases of developed world datasets. National AI strategy, data localization/privacy and trusted legacy of IT/software exports with no IPR issues have been the drivers alongside world's third largest software developer community and much younger talent pool for quick re-skillability.

While India may have missed the boat on leading development on the core infrastructure layers of AI/IOT, Web3 infrastructure and applications is where India is at par with or leading with several global leaders such as Polygon and 5ire supported by a global investor base. India's rich set of gaming and animation developer communities are now building for the metaverse.

Lastly and of most significance is the homegrown software stacks India has built, referred to as the IndiaStack, a set of open APIs and digital public goods that aim to unlock the economic primitives of identity, data, payments and more at the population scale. India's digitization has been revolutionized with Aadhaar, UPI, Bharat Bill Pay, DigiLocker, eSign and Fastag with many other stacks including ONDC for open ecommerce, Healthstack, National Digital Education Architecture (NDEAR) and available credit stack OCEN in the works. To look back, there are three factors that are instrumental in this rapid evolution.

The first is that India has emerged as the third-largest startup hub in the world, with 26,000-plus technology startups generating over $90 billion in value. While large volumes of affordable tech talent will continue to be an advantage; the context in which they are employed has significantly moved upstream to product development for global markets, core research, etc., that has given a tremendous amount of exposure. Now with the availability of capital, incubation/acceleration, plenty of angel and venture capital funding, the entrepreneurs are emboldened to dream big and build.

The second is that India is emerging as a garage of deeptech and hard science innovations. There has been 5X growth over the last five years in patents filed, albeit coming off a small base. Government aid in the form of targeted policies and strategies as part of this include the National Blockchain Framework, and AIRAWAT (AI Research, Analytics and knowledge Assimilation) to accelerate deeptech adoption have been pivotal. Similarly several grants, Design Linked Initiatives (DLI), challenges, incubators and policy support are building momentum for innovation, beyond the initial make-in-India narrative.

The third factor is the new product wave, 'building in India for the world' mindset, moving away from the 'localizing global models for India' mantra to 'innovating from India for the world' mindset.

According to the most recent assessment by NASSCOM, there are already over 3,000 deeptech enterprises, with one in three filing patents, in operation throughout the country. This is still paltry when you compare to the overall ecosystem but indicates the direction and room for tremendous growth.

There is a clear focus on developing strong intellectual property for creating first-of-its-kind technology innovations. Investors are finding these categories exciting over pure play consumer, fintech or SaaS enabling regular businesses, especially as they have longer term more sustainable moats and clearer pathways to profitability.

While plethora of challenges remain, most startups in the current wave seem to be adopting the Israeli way of establishing a global connect and customer base for scale-up, post-development, pilots and achievement of product-market fit, all done far more affordably in India in comparison to global counterparts.

Based on the previous two startup waves in India, we have an extensive ecosystem of executives and investors skilled at operating and investing based on technology-enabled businesses. But businesses today also have access to highly scalable data centres and cutting-edge software tools, which implies that business model innovations have lowered entry barriers in sectors such as financial services, healthcare, and even areas such as space, energy storage, mobility, chemicals, etc., that were previously thought to be resistant to technological adoption.

Time will tell if the move to deep technology focused solution development will result in outsized returns for investors, but till then investors are ready to enable real change armed with their checkbooks, market access and strategic support for the best that the ecosystem can offer.

Somshubhro (Som) Pal Choudhury

Partner, Bharat Innovation Fund

News and Trends

Sorich, Adloggs, and Suraasa Raise Funding to Fuel Innovation in Packaging, Delivery, and Education

The startups listed below have recently secured fresh funding to accelerate their growth and drive innovation across their respective sectors.

Branding

You Don't Need Thousands to Turn Your Business Idea Into Reality — Here's How I Did It on a College-Kid Budget

From creating the packaging designs online by myself to learning how to take professional product photos, I found ways to launch a company on a low budget. Here's how you can do it, too.

Leadership

Driving Innovation Through Calculated Risk; Key Takeaways from the Entrepreneur India Event 2024

The convene also reinforced that innovation isn't just about technology. It's about improving processes, predicting future demands and making smarter decisions with the tools already available.

Marketing

How a Single PowerPoint Raised $300 Million for This Founder

Brandtech Group CEO David Jones explains what led him to leave his executive comfort zone to build an AI-powered tech empire from scratch.

News and Trends

AI in India: Transforming Lives and Businesses for Good

While AI has its fair share of drawbacks, the emerging technology is largely used to transform lives and businesses for good