In every start-up’s life comes a ‘valley of death’, a phase where the company has begun operations but is yet to generate revenue. This valley is steeper for deeptech start-ups, which usually take longer to achieve a product-market fit.
Many deeptech companies start in college labs with the help of institutional infrastructure and resources. While government grants are enough to support lab-level research, deeptech companies need a lot more funding to set up production and launch in the market.
At the same time, it is still too early for any venture capital firm to step in. This is the stage at which most founders give up and the start-up plummets into the valley. In general, India does not have many venture capitalists who take moonshot bets — exploratory ventures without assurance of near-term profitability — on deeptech founders.
According to data from PrivateCircle, there were 32 funding deals involving deeptech start-ups during the fourth quarter of the financial year 2021-22, which is just 6 per cent of the 516 total funding deals during the period.
The lack of funding is not a reflection on the talent quality in India. Our researchers are working on some of the most sophisticated technologies, but the challenge is in scaling them for commercialisation. Some survive the ‘valley of death’ through smart go-to-market strategies, but these may not work for all researchers.
On the bright side, the government is making efforts to help founders safely cross the ‘valley of death’. For instance, the Department of Science and Technology put out the Scientific Research Infrastructure Sharing Maintenance and Networks (SRIMAN) Guidelines in 2022 to enable renting of scientific equipment by educational institutions and start-ups. This eased resource access for researchers. Later, in December 2022, the government announced plans to launch a deeptech fund called Digital India Innovation Fund.
Further, programmes like the Biotechnology Ignition Grant (BIG) Scheme have helped start-ups tide over this treacherous period. The sector needs more such deeptech-focused programmes and interventions by industry leaders, such as MNCs, willing to fund and mentor idea-stage deeptech companies.
While there is growing interest in foundational artificial intelligence (AI) models, we need to ask if there is enough foundational research in areas like healthtech, education, silicon alternatives for EV batteries, and climate-tech, which are relevant to India. Here, private capital can make a meaningful impact and accelerate India’s transformation into a developed nation.
(The writer is Director of Research at PrivateCircle, a private market intelligence platform)