Bharat Innovation Fund co-founder foresees global reach of Indian deep tech

India's deep tech sector has surged to over 4,500 firms, with strong government support and policy initiatives. But access to capital remains a challenge for startups in this sector

The deep tech startup ecosystem in India has come of age in India, growing from a few hundred firms in 2017-2018 to nearly 4,500 today, according to Somshubhro (Som) Pal Choudhury, co-founder and partner at Bharat Innovation Fund. Despite support from the government, which is also developing a deep tech policy, access to capital remains a challenge for startups in this sector. Choudhury also emphasise the need for large companies and the government to adopt deep tech. Business Standard’s Peerzada Abrar speaks to Choudhury, who was previously the managing director of Analog Devices India, a subsidiary of the $6 billion global semiconductor company headquartered in Boston, and spent almost two decades in various roles in Silicon Valley.

Edited excerpts:

What triggered you to focus on deep tech companies?

At Matrix Forum, which is a think tank initiative of TiE Bangalore and many other such avenues, we recognised that India is changing fast. India was originally a service-first nation. You built Infosys and Wipros of the world. That was wave-1. From 2007 onwards, we witnessed wave-2. It was more led by consumption. Indians got richer, acquired smartphones and used e-commerce. We also saw a lot of companies, especially multinational firms, set up their research and development teams in Bengaluru, Pune and other places. 

Many foreign-returnees, like me, came back from the US and Europe. Many of these folks were developing global products sitting out of India. Also, a lot of Silicon Valley-based startups have their R&D teams in India as well. Indians were already developing these fantastic products across the world, primarily in Silicon Valley. What we needed in India, was access to capital.

From FY16 onwards, we started seeing the emergence of many incubators, accelerators, angel investors, and early-stage VC funds investing in deep tech. The emerging industry also enjoys big support from the government, driven by the much-needed policy changes and focus on indigenisation. We saw an excellent opportunity to be one of the early leaders in the deep tech space. While other VC funds focus on e-commerce, marketplaces and other sectors, deep tech is what we love doing. This also includes deep science, hardware tech and a lot of advanced software.

What are the challenges faced by deep tech companies in India?

It is not easy to build deep tech startups out of India. A Silicon Valley startup would probably spend about $25 million to $30 million to develop a market-fit product. You can do that for $3 million to $5 million in India. However, access to capital is still a challenge. That’s because most of the investments are taking place in the e-commerce, marketplace and fintech models. Also, once you are a deep tech company, you have to find market-fit products sitting out of India, and then expand globally. The Indian customers, especially the business-to-business customers are still laggards in terms of technology adoption and willingness to pay for innovative technologies. They tend to see what has happened outside of India and try to replicate that. To scale up fast, many of these companies have to go beyond the border, to the US, West Asia and Europe, to expand their revenue base. Sometimes we see that the founders have to move the US and build the company from there. Those are some of the aspects that we look at. We work with startups very closely and handhold them to be successful.

Has the macroeconomic uncertainty created more challenges for deep tech companies?

None of our companies got hit by the debacle that happened between 2021 and 2023. The good news is that all our companies built extremely high-margin products. They are not the kind that spend money to acquire customers. Though the sales process takes long, the unit economics is positive from day one. Many of these companies after going through the product development phase between 2019 and 2021, raised funding in 2022 and 2023 at probably the worst of the times. We didn’t see the debacle observed in sectors such as edtech and fintech. Now, investors in India are saying that deep tech is emerging as an interesting area and capital has started flowing into it.

What are the trends in terms of new technologies that you are seeing in the deep tech space?

We have an entire focus on quantum computing and quantum security. The other area is, the entire stack of generative artificial intelligence (GenAI). We have started to narrow down the areas that we need to focus on.  For example, putting up guard rails related to security and privacy. We are focusing on space tech. Once there are multiple satellites in space looking at the Earth, there are many applications that could be leveraged.

Similarly, we have also done a deep dive into cybersecurity and privacy.  We are also looking at technologies that are transforming hard sectors such as the cement and steel industry. We would break down emerging technologies like GenAI stack into different parts like application, security and foundational models. We would then decide the opportunities, where we can invest in. We are looking at homegrown deep tech companies or which have a presence here, building in India and for the world.

What kind of government support and policies are required for deep tech companies?

Some of our companies including A5G Networks, are providers of infrastructure solutions for mobile networks. These companies are already working with different projects of the government including the Indian railways. As Matrix Forum, we have given a lot of feedback regarding deep tech policy. The government is pushing the deep tech policy, the frameworks, the AI and the quantum mission. These are all very positive. This would increase the number of deep tech startups in India.

In 2017-2018, you could hardly count a couple of hundred companies in this space. Today, there are over 4,500 such firms. We want a private-public kind of grant for the deep tech community with very specific challenges and milestones. This is like what the US government and others have done with their DARPA (Defense Advanced Research Projects Agency) grants.

Also, crowdsourcing for the funding of deep tech startups can be done. Here veterans from the industry and universities can bring in some capital at the initial stage before VC investments. The entire pieces of the puzzle need to be put into place. This includes getting funding and some amount of sandboxing by the government. Here, the government or Indian defence sector, or large companies can have access to the technology at an early stage or facilitate ‘paid proof of concept’. It should not prove this technology first and then we will pay you’.