Why homegrown deep tech innovation has the potential to create impact at scale

The deep tech sector is set for an exciting phase in India, especially in the backdrop of industries and the internet economy being poised for disruption by climate change and the metaverse. To set context, deep tech refers to technology (be it in software, manufacturing, biotech, life sciences, etc) that is disruptive, hard to replicate and with significant IP.

Through the dual lens of bits (software-engineering-led) and atoms (the physical world), it covers the entire gamut from applied research in aerospace to advanced gene therapy to artificial vision, robotics and conversational artificial intelligence (AI) platforms.

The sector dovetails nicely into impact, addressing hard-to-solve problems through the bleeding edge of innovation in climate change adaptation and mitigation, healthcare, agriculture and the like – e-mobility, best-value advanced prosthesis, sustainable dyes, waste-to-wealth, low-cost medical devices, AMR solutions, precision agriculture, plant-based proteins and agri-products, etc.

Globally, VC investments in deep tech solving for the hardest challenges is expected to have crossed $115 billion across ~6K transactions last year, with climate change and healthcare constituting the bulk of those in volume.

This follows a 48.7 percent y-o-y increase between 2019 and 2020 itself. Pre-money valuation in late-stage has seen a new high with a median of $80.7 million.*

The Indian deep tech startup ecosystem

India’s deep tech startup ecosystem has come a long way in the last few years, setting itself apart through its proximity to a large problem space, inputs and big data, with many bright minds working on globally competitive disruptive tech in stellar university labs and startups.

Government support in the very early stages is a key enabler (notably through BIRAC {Biotechnology Industry Research Assistance Council}, Department of Science and Technology, and facilities such as C-CAMP that are building an excellent pipeline), as are Nasscom and niche private players that have been increasingly active.

Domestic private capital investments had by and large favoured bits over atoms, due to the latter’s relatively longer journey towards revenue and an exit. That’s beginning to change, as investments in non-software areas are demonstrating massive returns, Moderna and Tesla for example, and represent a unique opportunity.

This opportunity conventionally attracted global investors who are more experienced and risk-willing, however there is growing interest in both generalist as well as specialised domestic funds. Data from Venture Intelligence shows that overall Indian deep tech VC investing in 2021 exceeded 130 deals and $1.4 billion, an increase of approximately 24 percent and 180 percent respectively from 2020.

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