How Budget 2024 can help India's nascent deeptech sector
The right steps are already being taken, experts say. It’s now time to accelerate implementation and improve the outcomes
Notable commitments to foster the deep tech ecosystem in the country include investments via the Government of India’s Rs10,000 crore startup fund of funds and a Rs50,000 crore plan approved last year for a national research foundation.
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In recent years, the union government has specifically called out India’s deeptech sector as an important area of focus, strategically critical to the country’s long-term economic growth and geopolitical standing.
Notable commitments to foster the deep tech ecosystem in the country include investments via the Government of India’s Rs10,000 crore startup fund of funds and a Rs50,000 crore plan approved last year for a national research foundation. The government has also released a comprehensive national deeptech startups policy.
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“The government is already taking the right steps and making the right fund allocations,” says Mredul Sarda, an alumnus of the Indian Institute of Technology (IIT) Bombay, who, after several years in the tech industry, has recently started a deeptech focused venture capital firm called Riceberg.vc, with two fellow partners.
Collectively, this trio brings deep experience in areas including software, health care technologies and cybersecurity to their firm. They are also an example of how India’s deep tech ecosystem is developing.
Be it BIRAC (biotechnology industry research assistance council), or iDEX (innovation for defence excellence), or opening up of the space sector, the government’s support is visible, Sarda says.
However, “the deployment of capital to the right channels” is a work in progress. “Hand picking funds or startups where tech actually is the biggest differentiator and home-grown technology is actually promoted, that filtering process can be improved,” Sarda says.
Rohan Ganapathy, co-founder and CEO of Bellatrix Aerospace in Bengaluru, echoes this: “We don’t yet have the data on how the Rs10,000 crore made it into the ecosystem,” he says.
This fund of funds, started in 2016 and administered via SIDBI, is not just for deeptech ventures but for the overall startup sector in the country. Still, the alternative investment funds through which this money is expected to reach startups have a planned corpus of Rs48,000 crore, according to a government press release.
Partners in this effort include some of India’s best-known venture capital funds that are active investors in the country’s deep tech startups – Chiratae, Blume Ventures, Omnivore, Aavishkaar and others.
Similarly the National Research Foundation is envisioned to “forge collaborations among industry, academia, and government departments and research institutions, and create an interface mechanism for participation and contribution of industries and State governments in addition to the scientific and line ministries,” the government said in June 2023.
Also read: How the Budget can help India's nascent space tech startups
Physical infrastructure in the form of high-end laboratories, testing labs, and GMP facilities is another area where India severely lags the rich countries of the West. GMP stands for good manufacturing practices, and such facilities refer to the cleanrooms needed by the pharma-biotech sector.
In Europe, if an entrepreneur wants to try something out, she has access to various centres of excellence to develop, test and validate an entire product lifecycle, Sarda says.
“This is where I think government can invest and it should also be aligned to the larger national objectives,” he says, such as India’s transition to renewable energy sources, for example.
Another example is R&D in nuclear energy has stagnated in recent years in India, he says. With all the access India has to Thorium, and with India’s existing rich knowledge base of nuclear technology, there can be a centre of excellence to support entrepreneurship in nuclear energy in the country, he says.
And in general, be it transportation, or telecom gear, or making cement for affordable housing, India has thus far relied on foreign tech and there is a need to invest a lot more in homegrown technologies, Sarda says.
“So, work on national objectives can translate into the right amount of capital carved out only for homegrown tech innovation, the distribution of which can happen via multiple centres of excellence,” he says.
Ganapathy at Bellatrix has two other points to make. The first one is in resonance with Sarda’s point about the right funding for the right (deeptech) startup.
“Instead of giving grants or announcing some competitions, the government can use the Rs1 lakh crore corpus to become an institutional investor and invest in VC firms, and ask them to identify and invest in (deeptech) startups,” he says. “That will give a huge boost, and it will be a workable solution.”
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The second point he makes is that “the government has to be the anchor customer” for strategic purchases in defense or space, for example. “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,” Ganapathy says.
Beyond the Budget, a national conversation is urgently needed on how India can achieve its lab-to-market deep tech objectives, says Arpit Agarwal, a partner at Blume Ventures in Bengaluru, who leads the VC firm’s investments in such startups.
“We don't think about what does it take to translate technology to the market. If the technology is good, what is the process of doing this, who are the people involved, what is the right process, what are the best practices?” he says.
“I think this is a very important conversation to have because when the broader audience understands it, there'll be a lot more empathy for the work that is already happening in the country,” Agarwal says.
Second, just as governments can be anchor customers, large conglomerates can also step up and support India’s deeptech startups by trying out their tech more often, he says. Third, Agarwal would like to see more of India’s STEM graduates opting to work in deeptech startups. Today there are many such companies doing cutting-edge work out of India, he points out. Therefore, when young graduates join such ventures, they have the “chance to get exposure to the full life cycle ahead of them,” he says.
