How deep is deeptech in India, really?

Going by the government line, it’s too shallow for a strong IP-led ecosystem to set sail in India. But the heat from commerce minister Piyush Goyal at the Startup Mahakumbh 2.0 has left founders with some thinking to do.

In private gatherings and public debates alike, the startup ecosystem is increasingly reflecting on whether the minister went overboard, flaying startups, or if India is still a laggard.

Well, statistically, the picture isn’t bleak. A NASSCOM-Zinnov report last year showed that 480 deeptech startups were established in 2023 alone, which grew 2X year-on-year. And over 100 of these newly launched startups developed intellectual property (IP) or innovative solutions in new domains.

Comprising verticals including robotics, AI, spacetech, defence tech, and semiconductors, the sector now boasts over 3,600 startups. Deeptech in India is seemingly in the spotlight today, thanks to the likes of Agnikul and Pixxel, which have garnered global attention in spacetech, and homegrown AI efforts from Sarvam AI and Soket AI, aiming to compete with global giants like Meta and Google. The list is long.

Despite visible gaps, this list of trailblazers is only getting longer with the collaborative efforts of entrepreneurs, venture capitalists (VCs), and the government. New deeptech-focussed funds have been launched, several sector-agnostic funds have begun allocating a portion of their investments to deeptech, and the government has also announced multiple state-backed funds to support the VC and deeptech ecosystem.

During this transitional phase, where the progress is steady and has started getting noticed globally, but not at a pace for India to claim complete self-reliance yet, Inc42 spoke to Sunil Goyal, MD and fund manager of YourNest VC, as part of Moneyball series. As one of the earliest VCs to bet on this space, Goyal shared insights into the various nuances, typical headwinds and tailwinds that the Indian deeptech ecosystem has faced, the approaches that the fund has historically taken, and the journey that lies ahead.

Back in 2011, when Goyal, along with Sanjay Pande and Girish Shivani, founded YourNest VC, the concept of deeptech in India was still in its infancy, and the startup ecosystem was riding the wave of the consumer internet boom. Although YourNest initially invested in a few consumer internet startups, it pivoted to become a deeptech-only fund within two years of the launch of its first fund in 2012.

Over the years, the VC has launched three funds, backed 51 companies (over 35 in deeptech), and has taken 10 exits at an average of at least 5X to 6X return. It now prepares for its fourth fund launch.

It invested in 16 companies from $14 Mn Fund I, a few of which, including Uniphore and ARYA.AI, were deeptech companies. Its $30 Mn Fund II backed 18 deeptech startups across sectors such as CRON AI, Exponent Energy, Orbo, LightSpeed Photonics, Uptime AI, among others.

YourNest’s $69 Mn Fund III has deployed almost 70% of the total corpus so far in 17 companies, including Perkant Tech, Map My Crop, ThinkMetal, CargoFL, EtherealX, and others.

The ethos of its brand is to provide “nurture capital”. Goyal said, “The brand name YourNest signifies that this is the nest where, if you, as an entrepreneur, keep doing well, you can keep coming back to us for extra capital and guidance. Whenever you are in a fledgling mode, come down to our nest, and we will be able to give you the wings to fly again.”

Edited excerpts from the interaction

Inc42: How has your investment thesis and the idea of ‘deeptech’ matured over the years?

Sunil Goyal: We must first understand that ‘deeptech’ as a definition will continue to evolve. Whatever is deeptech today, tomorrow it will be treated as a normal tech business.

Initially, we started with consumer tech, then moved to conversational AI with Uniphore as our first bet. After Uniphore, we invested in ARYA.AI, a horizontal AI platform for developers. In 2016, we invested in an IoT play, where the company had 30 patents around wearable technology. Taking a leap from there, today we are investing in India’s most powerful quantum computing startup, QpiAI. So, that’s how our understanding of deeptech has also evolved.

It doesn’t mean that the innovation in........

© Inc42