Solutions to the most pressing problems of today are multifaceted, but rooted at the intersection of engineering, sciences, hardware and software. Recent global developments have necessitated the intervention of deep-technology (deep-tech) solutions.
The adverse impact of climate change has been looming over us for decades, and pushed us to adopt renewable energy, electric vehicles (EV) and more sustainable products over time. Similarly, the collapse of global supply chains has prompted nations to prioritise domestic manufacturing initiatives.
The new decade is set to be dominated by cutting-edge technologies, bringing about disruptive innovation. The combined efforts of investors, private companies, academia and the government are vital to empowering this transition.
A pandemic-struck 2020 saw over 14% of all investments in tech startups dedicated to those leveraging deep technologies. In 2021, rising from the headwinds of the second wave of the pandemic, deep-tech startups raised over $500 million in funding in Q2 and Q3, comprising 19% and 15% respectively of all investments that went into startups leveraging deep-tech solutions (encouraging numbers, considering this was <6% in 2017).
We have seen highly motivating trends in 2021 across this segment, as illustrated by developments in space tech, and the EV and battery-tech sectors.
The Indian space sector has grown nearly 2X since 2017, with a compound annual growth rate (CAGR) of 13%. Today, there are over 120 active space-tech startups in India, with two-third established in or after 2014.
Of all the investments related to environment and sustainability in 2020 and 2021, investments in EVs were recorded at close to $300 million, of the overall $444 million.
The government, through its various schemes and initiatives, has supported the deep-tech ecosystem. The Indian Space Association (ISpA), launched in October 2021, has enabled private players to work in tandem with The Indian Space Research Organisation (ISRO). The EV and battery tech space also made significant strides forward. The government launched the e-AMRIT portal at the COP26 Summit in Glasgow in November, set up to function as a one-stop destination for all information on electric vehicles. The revisions to the FAME - II subsidy in June 2021 are expected to encourage the adoption of EVs. Ultraviolette Automotive and Ather Energy laid the foundations for their new manufacturing facilities.
Outlook 2022 We remain extremely bullish about the opportunities for the deep-tech sector in India. Space-tech startups continue to make incredible progress since the sector was opened up for private players in 2020. ISRO can now focus on strategic missions, and allow private startups to focus on the routine launches of satellites. Together, the nation wants to increase its share in the $ 440 billion global space market, from the present 2% to 10%.
With the shift to EVs and sustainability, innovations in energy-storage solutions are of the utmost need. Supply-chain constraints on rare-earth metals has pushed innovators to look beyond Lithium-ion batteries. Indian startups are exploring solid state batteries, metal air, and other metal ion chemistries, in addition to hydrogen cells - all supported by production-linked incentives (PLIs) provided by the government.
Looking ahead, with the ecosystem being primed to support deep tech in India, venture capital (VC) investment is expected to proceed at an accelerated pace. All this has brought about the availability of a large pool of ‘patient capital’ - a vital ingredient for the ecosystem to flourish. Infrastructural advancements have made deep-tech investing with small cheques more meaningful. Today, it is possible to have a space-tech company with around $10 million in capital, a feat almost impossible a decade ago.
Indian deeptech startups are building products not just for India, but for the world. It is our time to shine. 2022 is just the beginning of a revolution.
Vishesh Rajaram is Founder and Managing Partner of Speciale Invest; Sunil Cavale is Senior Analyst, Speciale Invest.