Trends That Will Shape India's Deeptech Sector This Year India is being called the next deeptech hub and investors believe that many startups have scalability potential

Many macro conditions have come as a blessing in disguise for India's deeptech industry. For instance, the pandemic has resulted in an increased awareness towards sustainability, which has opened up doors for more deeptech use cases in the electric vehicle (EV) and climate change industries. The increased adoption of technology during lockdowns has paved the way for the adoption of artificial intelligence (AI), machine learning, internet of things, big data and robotics across sectors. Many deeptech startups are thus able to find the right product-market fit in India today.

The unfortunate Russia-Ukraine war led to an oil crisis, which further improved the adoption of EVs in India and many countries. The crisis also opened up opportunities for India's spacetech startups such as Agnikul.

The uncertainties in the supply chain in the last two years have also forced many companies to ramp up domestic manufacturing. These companies will depend on advanced technologies to achieve scale with profitability.

Artificial Intelligence dominance

India is being called the next deeptech hub. Investors believe that many startups have scalability potential. Experts say that the penetration into healthcare and household will particularly lead the revolution and unknowingly consumers will see a strong affinity to AI-backed products like smart cameras, locks etc.

"The concept of AI has revolutionized technological advancement for decades, and more recently there have been a number of developments that point to the idea that it will become even further integrated into our everyday lives in the near future. As AI grows increasingly sophisticated and powerful, its capacity to impact many different industries only continues to expand: from marketing and customer service to healthcare applications, AI technology is becoming an invaluable tool in performing complex tasks with precision speed," said Sunil Shekhawat, CEO and founder, Sanchiconnect.

Generative AI is already turning heads across industries with ChatGPT and DALL.E. Tech giant Microsoft announced a $10 billion investment in ChatGPT last month and Google announced its competitor in the form of Bard AI a few days back.

"These language models will allow businesses to take their speech recognition, question-answering, and user engagement capabilities to the next level," said Rishi Agrawal, CEO and co-founder, Teamlease, Regtech.

AI will also see increasing adoption and integration with IoT (Internet of Things) devices. "It will become pivotal in analyzing real-time data to detect and prevent anomalies and equipment failure. This will reduce the dependence on a central or cloud server. In recent years, there has been a significant leap in visual identification technology. Coupled with machine learning, it has great potential in the healthcare, agriculture, and finance industries among others," he added.

Increased investor interest

Institutional investors are amplifying their investment in deeptech. India is home to more than 3,000 deeptech startups, with a cumulative growth of 53 per cent in the past 10 years, says a report by Nasscom."Deeptech startups in India, which comprise 12 per cent of the total startup ecosystem, have raised around $2.65 billion in funding in 2021," it says.

Experts feel that while it is too early for mergers and acquisitions, we may see a few unicorns in the space this year.

The edge of patents to drive profits

The above report also says that over 30 per cent of Indian deeptech startups have filed for patents. This is the greatest differentiator for deeptech sector. IP creation will be valued much more than immediate revenues and profits.

Growing software-hardware integrations

This shift in investments, experts believe, is likely to bring a lot of changes, particularly in hardware-based product companies. "SaaS integration could be an increasingly common factor incorporated into these types of business models, as this offers the ability to massively expand fundability and potential returns. It's clear right now that Deeptech investment presents a great opportunity for savvy investors and entrepreneurs alike," said Shekhawat.

R & D on batteries

With climate change needing immediate solutions, more and more startups will develop non-lithium based quick charging battery technologies for the EV space. "Energy security is a top priority among nations across the world and India is no exception. With the mass adoption of electric vehicles around the corner, battery technology is expected to undergo a long-awaited breakthrough. Lithium-ion batteries, first introduced in 1991, are the prevalent energy storage solution but lithium mining and disposal pose significant environmental risks. Battery technology is the key to ensuring a green transformation of the economy," said Agrawal.

Smarter solutions without losing revenue focus

"Deeptech startups are setting the trends for innovative ways of making money while finding smart solutions to common problems - thus creating a future full of possibility," said Shekhawat.

Deeptech startups are changing the way we view and think about the world. The emergence of domains such as quantum computing, spacetech, climate tech and metaverse are revolutionizing the technology landscape. "As these domains continue to increase in popularity, businesses that focus on these domains no longer can rely on novelty alone to draw in customers. Instead, there will be a revenue component that will form part of the evaluation matrix for success. Moreover, the crossover will be seen more frequently and the differentiating line between tech and deeptech will get thinner with AI taking the lead through its unique algorithms," he added.