The R&D corpus marks a pivotal shift towards making India a product-led nation from a service-led one and enhances India’s global value, said Sunicon Ventures Saloni Jain
A major consensus among Indian investors is that the R&D corpus and the proposed defence-centred deeptech scheme will drive more investment to the startup sector
Despite the funding winter, Indian deeptech startups raised $432 Mn in 2023, up from $397 Mn raised in the year-ago period
As finance minister Nirmala Sitharaman stepped up to present the interim Budget 2024, most industry watchers did not anticipate many major announcements. However, the FM surprised the startup ecosystem with her announcements, especially the deeptech players.
At the outset, Sitharaman announced a mega INR 1 Lakh Cr corpus for Indian startups and enterprises to fuel research and development (R&D) in the sunrise sectors. Under this, the government will dole out ‘long-term financing or refinancing’ at low or nil interest rates.
Not stopping there, she also proposed a new scheme that would push the deployment of deeptech technologies in the defence sector and make the country self-reliant.
Both these announcements hold weight as they have a direct bearing on the Indian startup ecosystem. These initiatives have the potential to especially spur the deeptech ecosystem, which continues to be research-centric and takes a longer gestation period to build a viable go-to-market product.
“We have long sensed a gap in India’s deeptech sector due to a lack of patient capital. The recent reform addresses this weakness, marking a pivotal shift towards making India a product-led nation from a service-led one. This change enhances our global value and positions us strongly in the international landscape,” said founding partner at Sunicon Ventures Saloni Jain.
Speaking with Inc42, general partner at WEH Ventures, Deepak Gupta, said that the new fund will complement the government’s existing PLI scheme and will boost the country’s R&D spending by an additional 0.5% of the total GDP.
As per reports, India’s R&D expenditure to GDP ratio stood at 0.7% in 2022, a far cry from the global average of 1.8%.
While investment director at Omnivore, Abhilash Sethi, said that the corpus will give a major fillip to R&D in India, alternative debt platform Blacksoil’s cofounder and director Ankur Bansal said that the fund will drive more investment from the private sector and foreign investors.
“The allocation of nearly $13 Bn funds for research and innovation, coupled with a focus on sunrise sectors, signifies a major boost. This financial support will catalyse advancements in spacetech segments and position India as a key player in the global arena,” said SatCom Industry Association’s (India) director general Anil Prakash.
Artha India Ventures’ director Anirudh Damani opined that the R&D fund will invigorate entrepreneurship in Tier-II & III towns and will set the stage for the country’s next 100 unicorns.
“The government’s move to provide interest-free loans is a game-changer, not only facilitating capital accessibility but also encouraging deeper penetration by institutional investors in search of disruptive startups. This strategic intervention is poised to reshape India’s entrepreneurial landscape, heralding an era of widespread innovation and growth,” added Damani.
Not just investors, founders also welcomed the new corpus and the proposed scheme for defence-focussed deeptech startups in the interim Budget 2024.
Deeptech Sector Erupts In Applause
While more details are awaited on the contours of the fund and the deeptech scheme, the sector is looking to cash-in on both the announcements.
While the proposed scheme will largely centre on the deeptech startups in the defence sector, the R&D corpus is expected to veer heavily in favour of deeptech startups that are largely research-led and involve new and emerging technologies.
Speaking with Inc42, Marut Drones’ founder and CEO Prem Kumar Vislawath termed the R&D corpus as a step in the right direction, adding that this will aid Indian startups that have little space for mistakes during their research phase.
Chiming in, Continental Device India’s Prithvideep Singh said that, historically, all major research-driven firms have been nurtured via government support in their early days. “This support gives firms the time and capital to scale up their volumes and capabilities for the price-sensitive consumer markets,” he added.
Singh also noted that the move reflects the government’s proactive steps to fortify resilience against potential global supply chain shocks such as the pandemic.
“India is positioned for revolutionary growth in the aerospace manufacturing sector and this budgetary emphasis aligns with our collective vision to contribute positively to the broader growth of the aviation manufacturing sector,” said Jeh Aerospace’s cofounder Venkatesh Mudragalla.
Deeptech is the heart of highly-contested areas of emerging technologies, such as semiconductor, spacetech, aerospace, among others, that could emerge as the next geopolitical flashpoint among countries.
Bharat Innovation Fund’s cofounder Shyam Menon also said that increased support for R&D could help build disruptive technologies that could later be leveraged to develop transformative consumer or B2B products.
Much More On The Anvil
Despite the sops, the Indian deeptech startup ecosystem wants more. With the interim Budget a precursor for the full-Budget slated for later this year, the deepetch sector wants the government to do more.
Marut Drones’ Vislawath wants the Centre to streamline financing for Indian startups and make the entire process easy. He wants the Centre to reduce GST rates on consumer-facing deeptech products as well as the extension and a new PLI scheme for components spanning various deeptech segments.
“The focus on deep-tech technologies for defence purposes underscores the importance of self-reliance and innovation in critical sectors. However, what is missing in the budget is a mention or focus on cybersecurity, which is crucial,” added Nandini Tandon, cofounder and chief people officer at Indusface.
Meanwhile, Sunicon’s Jain wants adequate long-term funding to sustain the R&D push and more initiatives to nurture skilled talent in the sector. She also pitched for strengthening the ecosystem with well-equipped labs and collaborative spaces to further fuel the ecosystem.
Amid all this, the interim Budget 2024 appears to have recognised the growing star in the Indian startup ecosystem, the deeptech sector. As per Inc42 data, the sector has raised more than $1.5 Bn since 2014, with $432 Mn coming in 2023 alone.
Even as funding winter led to a decline in funding numbers across the board, deeptech was one of the few industries that saw a year-on-year jump. It also saw a mega deal (excess of $100 Mn) in the form of GreyOrange which raised $135 Mn last year.
India’s deeptech sector has matured significantly in the past 10 years and much more seems to be on the anvil.
“Despite global challenges, entrepreneurial spirit in India remains solid and I believe the opportunities for growth in 2024 are abundant and India’s deeptech startup ecosystem is ready to catch-up in coming years,” concludes JITO Incubation and Innovation Foundation’s chairman Rajat Mehta.
