Into the Deep: A Primer on DeepTech Start-ups in India

In the ever-evolving landscape of technology, DeepTech has emerged as a force that is reshaping industries, disrupting the status quo, and unlocking unprecedented possibilities. As the business landscape evolves globally, start-ups are increasingly tapping into the potential of Advanced Technologies to address and solve real world problems, create new and innovative business models and drive transformation.

What is a DeepTech start-up?

DeepTech start-ups are active technology start-ups that create, deploy, or utilize advanced technologies in their products or services. Advanced technologies largely include Artificial Intelligence/Machine Learning, Internet of Things (IOT), Blockchain, Big Data & Analytics, Augmented Reality/Virtual Reality (AR/VR), Robotics, Nanotechnology, Biotechnology, Advanced Materials, etc.

Characteristics of a DeepTech start-up:

India’s DeepTech start-up ecosystem is witnessing a phenomenal upswing, drawing attention from Venture Capital (VC) firms, ambitious start-up founders, and progressive corporates. The emergence of advanced technologies and innovative business models has fueled this surge, making it a compelling space for strategic investments and collaborations.

DeepTech start-ups are characterized by:

1. Complexity: They have complex technical solutions that have the potential to redefine or create new markets. E.g., QNu labs, a start-up that has developed patented products and solutions and, on a mission, to change cryptography landscape globally).
2. Intersection of Technologies: These start-ups could work at the intersection of technologies, i.e., they leverage more than one technology to provide solutions. E.g., Crayondata leverages both AI and Big Data to derive at data driven solutions in Banking, Fintech, and Travel industries.
3. Long Development Cycles: DeepTech products typically have longer development cycles compared to traditional start-ups, due to the complexity of the technologies involved. E.g., Log 9 Materials, a cutting-edge nanotechnology solutions provider has been investing in extensive research, testing, and validation. The company’s commitment to pushing the boundaries of technology has led to longer development cycles as they work to overcome technical hurdles and bring their innovative solutions to market.
4. Intellectual Property: DeepTech start-ups often focus on developing and commercializing intellectual property such as patents, proprietary algorithms, or unique research methodologies. E.g., Shilps Sciences, a deep science company that develops novel solutions for imaging and characterization at the nano & micro scale has multiple patents to its name.
5. High Entry Barriers: The advanced nature of the technology leveraged, and the need for substantial Research & Development (R&D) create high entry barriers for potential competitors. E.g., Niramai Health Analytix, the deep-tech start-up with non-invasive breast cancer screening solution in India, has now received US FDA clearance for their first device called SMILE-100 System, 6 years after inception of the company.
6. Strong R&D Focus: R&D is a fundamental aspect of DeepTech start-ups. They continuously invest in improving and innovating their technology to stay ahead of the rapidly evolving tech landscape. E.g. GreyOrange, a robotics and automation solutions start-up’s R&D efforts are centered around developing cutting-edge robotic systems that can handle various tasks such as sorting, picking, packing, and replenishment.
7. Need Patient Capital: Because of the strong R&D focus and nature of projects, DeepTech start-ups need long-term investment funding to reach maturity and generate returns.

Given their distinct attributes, DeepTech start-ups in India are set to play a pivotal role in advancing India’s ambitious goal of achieving a USD 5 Tn digital economy. This potential extends beyond mere economic growth, as these start-ups have the capacity to profoundly address India’s unique challenges. By leveraging their capabilities, Indian DeepTech start-ups have the ability to offer solutions that propel the realization of India’s Sustainable Development Goals (SDGs), particularly in areas like hunger alleviation, climate action, clean energy, and water management.

Market Opportunities for DeepTech Start-ups in India

In the broader context of the entrepreneurial ecosystem, DeepTech start-ups stand to gain substantial benefits. They are well-positioned to tap into opportunities stemming from collaborations with Large Enterprises, particularly within critical sectors including HealthTech, AgriTech, and CleanTech. As demand rises for transformative solutions, these start-ups are set to flourish and contribute significantly to the collaborative landscape.

• Untapped Potential

India, boasting a vast talent pool and fostering a thriving entrepreneurial culture, offers untapped potential for DeepTech start-ups. Recognizing this unparalleled opportunity, VC firms are increasingly directing their attention towards investing in groundbreaking innovations that not only cater to India’s unique challenges but also hold global market appeal.

• Rising Demand in Key Sectors

India, boasting a vast talent pool and fostering a thriving entrepreneurial culture, offers untapped potential for DeepTech start-ups. Recognizing this unparalleled opportunity, VC firms are increasingly directing their attention towards investing in groundbreaking innovations that not only cater to India’s unique challenges but also hold global market appeal.

• Government Support and Initiatives

The Indian government has been proactively promoting and supporting the start-up ecosystem, providing incentives and implementing favorable policies. Such initiatives create a conducive environment for founders to establish DeepTech ventures.

Since there are immense opportunities to tap into, both Indian and global enterprises can harness India’s DeepTech potential in several ways:

1. Collaboration and Partnerships: Enterprises can collaborate with DeepTech start-ups through partnerships, joint ventures, or strategic alliances. Such collaborations allow access to innovative technologies and expertise that may not be readily available within the corporate structure.
2. Acquisitions: Enterprises can acquire promising DeepTech start-ups that align with their strategic objectives. By integrating these start-ups into their organization, enterprises can gain access to cutting-edge technologies, intellectual property, and specialized talent.
3. Innovation Hubs and Accelerators: Setting up dedicated innovation hubs for DeepTech start-ups fosters a culture of innovation within enterprises. This provides an avenue for nurturing and supporting early-stage start-ups, encouraging the development of disruptive technologies.
4. Acqui-hiring: As a strategic initiative, enterprises can leverage acqui-hiring as a strategic channel to expand their talent and skill base, allowing them to recruit skilled professionals with a deep understanding of advanced technologies and industry-specific challenges.
5. Access to New Markets: DeepTech start-ups often explore niche markets and emerging technologies. Enterprises can leverage these start-ups’ expertise to gain insights into new markets, customer segments, and potential growth areas.
6. Accelerate Digital Transformation: DeepTech start-ups can play a crucial role in accelerating a corporate’s digital transformation journey. Their technologies can streamline processes, optimize operations, and enhance customer experience, contributing to overall business growth.

Challenges for DeepTech Start-ups on their Path to Success

Despite promising potential for DeepTech start-ups in India, several challenges exist, which may slow down growth.

• Talent Acquisition and Retention

DeepTech solutions require niche technical capabilities, posing challenges for start-up founders in acquiring and retaining top-notch talent. The high demand for skilled professionals such as AI/ML Engineers, Blockchain Developers, Computer Vision Engineers, and IOT Security Specialists necessitates building a compelling work culture and offering competitive compensation and benefits packages.

• Regulatory and Compliance Hurdles

Navigating through complex regulatory and compliance frameworks can be daunting for DeepTech start-ups. Certain sectors like HealthTech, still require specific approvals, such as Device Regulation, Data Privacy, and Clinical Trials.

• Scalability and Market Penetration

Achieving scalability and market penetration can be formidable tasks for DeepTech start-up founders. Since the gestation period for DeepTech products and solutions is generally longer than that of traditional start-up, it may lead to a flatter trajectory that requires more time to establish market presence and scale operations.

The Way Forward

The DeepTech start-up ecosystem in India offers immense opportunities and compelling journeys for VC firms, start-up founders, and enterprises alike. With vast untapped potential, growing demand in key sectors, dedicated government support, and a commitment to solving real-world problems, the DeepTech space in India is poised for exponential growth. Enterprises must embrace disruptions, navigate through challenges, and recognize the global potential of DeepTech innovations. As stakeholders in India’s DeepTech revolution, we have a great opportunity to transform industries, make significant impact, and create a future where innovation knows no bounds.