A trend that is being observed with regards to the deep-tech start-up ecosystem in India is that the investment sizes, whether in very early-stage companies or those further along in early or mid-stages, are now generally smaller.
“The ecosystem continues to invest, but the checks being written are smaller. Investors now expect companies to prove product-market fit and business model fit before committing larger amounts,” says Jeyandran Venugopal, chair of Nasscom DeepTech Council. Investors now expect companies to first prove product-market fit and business model fit before committing larger amounts, adds Venugopal.
Speaking to Outlook Business, Venugopal highlights that India now has approximately 3,600 deep-tech start-ups, with nearly 500 of them established in 2023 alone—double the number from 2022. This increase includes a new class of 'inventive deep-tech' start-ups, which focus on creating intellectual property or entirely new solutions rather than building on existing technologies.
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“As a result, the Indian venture ecosystem is adjusting to how it approaches investment, exits, and timelines for these start-ups, making this a complex transition for the industry,” says Venugopal.
In terms of funding for deep-tech start-ups, there was a 77 per cent decline as per a Nasscom-Zinnov study released in June 2024. It indicates that the funding decreased from over $3.7 billion raised in 2022 to $850 million raised in 2023.
“Deep-Tech start-ups, particularly those requiring patient capital and long incubation periods before commercial viability can be proven, face specific challenges. These issues are especially relevant to inventive deep-tech companies,” says Venugopal.
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However, Venugopal says that the increase in the number of start-ups and the global economic downturn, often called "funding winter," have negatively affected the start-up ecosystem. “As the investment landscape evolves, we anticipate that funding will return to previous levels and possibly exceed them over time,” he adds.
Deep-Tech is being used in various fields ranging from space and defense, healthcare, automotive, and industrial manufacturing. Various technologies, such as drone tech, satellite imagery for agricultural forecasting, and diagnostics in healthcare, are being made by these start-ups. Now the question arises: Will deep-tech primarily cater to B2B applications, or can we expect to see B2C solutions in India as well?
Venugopal says, “I anticipate we will witness both types of applications. My interactions with start-ups through various forums have shown that many are focused on enterprise solutions in areas like BFSI (Banking, Financial Services, and Insurance). However, there will also be startups emerging with consumer-focused applications.”
IndiaAI Mission
A significant push by the government with regards to deep-tech start-ups is the IndiaAI Mission. The mission, approved with a budget of Rs 10,372 crore in March, intends to enhance India's AI infrastructure by developing AI across various sectors.
Further, it also aims to establish computing capacity, including up to 10,000 graphic processing units (GPUs) and more. “Moreover, the government is working closely with the VC ecosystem to create the India AI mission fund, which has a budget of over 10,000 crores, with 2,000 crores allocated specifically to support start-ups,” says Venugopal. The government is also considering foundational models and seeking input from researchers and industry stakeholders on how to develop them, he adds.
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