Budget 2024: Space tech founders, VCs welcome signalling impact of new Rs1,000-crore fund

Agnibaan Suborbital Technological Demonstrator (SOrTeD) rocket of Chennai-based Agnikul Cosmos sits on the launch pad at Satish Dhawan Space Centre, in Sriharikota. Image: PTI Photo
 
Finance Minister Nirmala Sitharaman proposed a Rs1,000 crore venture capital (VC) fund to support the country’s space tech startups, a measure that comes on the heels of the government’s efforts in recent years to open the sector to global private investments.
 
“With our continued emphasis on expanding the space economy by five times in the next 10 years, a venture capital fund of Rs1,000 crore will be set up,” Sitharaman said in her Budget speech on July 23.
 

Beyond the quantum of the fund itself, this move at the highest level sends a clear signal to global investors that the government is serious about opening India’s space industry to private investment, founders and venture capital investors say.
 
“It’s wonderful news for all of us in the sector. This will encourage more private player participation and help larger players emerge out of India’s space startup ecosystem,” Srinath Ravichandran, co-founder and CEO of Agnikul Cosmos, a space launch vehicle maker in Chennai, says.

“It is also a clear sign from the government that it is going to be following through with all the support and backing for opening up the space sector,” he adds.
 
That signalling effect is probably the more important aspect of this proposal by the minister: “It’s not just about the Rs1,000 crore, this money will attract further private investment, and we believe the cumulative effect will be in the order of Rs3,000 crore to Rs5,000 crore,” says Tushar Jadhav, co-founder of Manastu Space, a green propulsion systems maker in Mumbai. “This fund, linked with the liberal FDI [Foreign Direct Investment] policy, is a great catalyst for the growth of space startups.”  
 
In February, the government amended FDI rules to allow as much as 100 percent investments via automatic route in certain categories such as satellite subsystem and components manufacturing.
 
The government’s estimate projects the size of India’s space sector to increase from the current $8.4 billion to $44 billion in 2033, raising India’s share of the global space industry from 2 percent to 8 percent. This could go as high as $100 billion, the consultancy Arthur D Little says, if investments and efforts in certain focus areas are stepped up.
 
Indian space tech startups have gone from raising only $35 million in funding between 2010 and 2019, to $28 million in 2020 to $96 million in 2021 and $112 million in 2022, according to Tracxn, a private markets intelligence provider.
 
Even though the VC funding landscape shrank last year, the sector in India had attracted $62 million in funding as of August 2023. They are developing a range of technologies and products, including hyperspectral imaging, 3D-printed rocket engines, satellite propulsion systems and sustainable green rocket fuels.
 
Today there are several Indian space startups that are looking for growth capital of as much as $50 million each, having demonstrated the provenance of their technologies.

Also read: Moving beyond launch: Realizing the benefits of the new space economy

The Missing Piece 

“We believe the one last missing piece of the puzzle is government procurements from homegrown space startups and allocating an amount for it,” Jadhav adds.
 
Rohan Ganapathy, co-founder and CEO at Bellatrix Aerospace in Bengaluru, echoes this: “The government has to be the ‘anchor customer’ for strategic purchases in defence or space,” he says. “Globally, when you sell, everybody asks one question, who is your customer? And did you prove it in space? To answer this question, globally, the government is your anchor customer. That's not the case with India.”
 
The corpus allocated for this fund could also have gone beyond Rs1,000 crore, Ganapathy says. “It’s definitely a welcome move, but it will only be enough to support early-stage startups,” he says. “We wish to see them play a bigger role as institutional investors if we aspire to gain access to at least 15 to 20 percent of the global $450 billion industry.”

Anirudh Sharma, co-founder and CEO at Digantara Research and Technologies, a space domain awareness specialist in Bengaluru, says “while it's a promising beginning, sustaining this momentum requires a strategic approach involving diverse investments. “It is crucial for the state to act as a primary customer, driving demand and fostering a robust ecosystem.”

“We are heading in the right direction, but this fund isn’t enough for the growth stage,” Sharma adds.
 
VC investors also had similar reactions, welcoming the intent behind the fund and adding that the sector needs support at every stage, as several startups are coming of age and looking to soon commercialise their products and technologies.
 
“This is a good beginning. I wish it was a $1 billion fund,” says Sateesh Andra, managing director at the VC firm Endiya Partners, succinctly capturing the mood in the ecosystem.
 
“It is welcome to see a clear policy direction coming from the finance minister in direction of a strong, wider and more vibrant space economy,” says Arpit Agarwal, a partner at Blume Ventures. “We perhaps need to ensure capital is available at every step of a startup's growth journey for this fund to be better utilised in making India the space hub of the future.”