Deeptech Playbooks Are Being Written By Early Stage Startups Today: Peak XV’s Rajan Anandan

Deeptech startups in India today are writing the playbooks and building the precedents that will keep the Indian tech and digital economy on pace with global developments, believes Rajan Anandan, managing director of Peak XV Partners and Surge.

Peak XV’s ninth cohort of Surge, its early-stage accelerator and incubator program features 13 early-stage startups, seven of which are based in India. And the latest batch has a significant number of deeptech and AI startups, which is not by design but by circumstance.

Anandan claimed it’s not in the nature of Surge to pick a trend or a theme to focus on when selecting startups. As it happens, most of the early-stage innovation is happening in these spaces.

“We set out to find the absolute most interesting, most audacious founders building the most interesting companies and I think what you’re seeing is the underlying nature of the ecosystem changing. It seems that more and more companies are AI companies today,” Anandan told us.

While deeptech is a wide space, the companies in the cohort are solving problems in manufacturing, semiconductors, quantum computing, climate tech, and healthcare. Over 75% of the Surge 09 startups have cross-border operations and ambitious plans for global expansion.

We spoke to Anandan about how India is poised to capitalise on the rise of AI and deeptech and how Surge is excited about helping build companies that will change the course of India’s tech economy, which has gone from services to products in the past two decades.

Edited excerpts

Inc42: As someone who has been keeping a close eye on early stage innovation and given the number of deeptech startups in the Surge cohort, do you believe this is AI’s year? 

Rajan Anandan: Deeptech is not just AI, right? Even if you go back to the Surge cohorts three years ago, we were seeing AI companies because we tend to be very early. So we were investing in early AI companies even before generative AI became this big buzzword.

But what’s different about this year is that we are seeing what’s happening beyond AI and that’s very critical for the Indian tech economy to mature beyond where we are. What’s really new in this cohort is we have two semiconductor companies. Mindgrove is making systems on chip. InCore is building a fabless semiconductor startup. The very first truly indigenous made-in-India chip that will be going into production over the next several months is being built by this company.

The ecosystem is changing much more towards science-based, IP-based, hardware-software combinations, in addition to AI. They are very different compared to the startups that you may have seen in the past cohorts.

Inc42: One of the criticisms in relation to the deeptech sector is that founders don’t have the right approach for go-to-market or from a monetisation point of view. What are your thoughts on this?  

Rajan Anandan: You know you can’t go about developing green hydrogen with electrolysis like Newtrace if you don’t know the science. So yes, founders in deeptech are typically very deeply technical. The startup’s founders are two PhDs and they have been at it for a while. They did the PhDs in Europe and started this company three years ago after coming back to India.

But there’s something called technology readiness level at tech companies or for tech-based innovations. But we only invest through Surge when the tech is ready to be commercialised. So we know that these companies are ready to hit the market or in some cases are already out there.

But with Surge, we also focus on three key things, which addresses some of the gaps we may typically see.

The first is around the basics of building a startup — from culture to hiring and managing talent, etc etc. The second is around how do you really make the right design choices commercially, for example when it comes to pricing.

The third is go-to-market. For instance, we have a lot of sessions around enterprise sales or serving large companies or how do you sell to governments, which is what many deeptech companies in the defence sector have to do. So our focus is on helping founders, giving them the right foundations, a toolkit, and the skill sets for building enduring companies.

Even a lot of our software companies are being built by engineers, so even if they have the technical expertise they have combined it with the commercial aspects.

Inc42: But SaaS or software companies even six-seven years ago had a playbook to follow from companies like Zoho or Freshworks or even others that have cracked the global market. Indian Deeptech does not have that deep history yet. 

Rajan Anandan: Firstly, within Surge we have very good playbooks for SaaS or other segments. Let’s say you decide to launch a SaaS company tomorrow. You can go ahead and read the playbook and chat with us for a couple of hours to get a better idea. We don’t have those yet for deeptech. But in time we’ll fill that gap.

I think it’s not just Peak XV; it’s the entire ecosystem, right? We have two semiconductor startups creating products, co-IPs and chip design and things that have not been seen before. We are not talking about services in the semiconductor space which the likes of HCL have been doing.

This is all very early, but I think it’s exciting to see this very high-calibre talent emerging from India, and these companies are solving problems that will have a mark on the world.

Inc42: A lot has been said about building for the world from India, but is that forgetting about the many problems that are yet to be solved for the Indian market?

Rajan Anandan: India has a twin-engine innovation ecosystem. One engine is focused on India and innovating for the domestic market. We are seeing entrepreneurs focused on every possible sector, from edtech to ecommerce to fintech, logistics and others.

The second part of the engine is innovating for the world. And I think there the context goes back to the 1980s when Infosys was founded. Since then Indian companies have been building for the world or providing services to the world, so in that sense, this new wave of SaaS companies building global products is not entirely new.

I would say that 40% of the Indian startups that raised seed funding in 2022 were building for the world from day zero. Founders are looking beyond SaaS, with manufacturing, which requires a totally different approach to building a business.

Now we are also seeing this evolution of Indian entrepreneurs going beyond SaaS, with AI, which is actually software but you know more than that. We are now in this zone, where innovation is everywhere and it can come from anywhere.

Inc42: In 2023, we have seen many founders quit startups to start up afresh in these sectors. Is this something you expect to see more of as new growth segments or sectors emerge? 

Rajan Anandan: I don’t think we should look at it negatively or positively. The thing to keep in mind is that these founders give their heart and soul to their startup. Being an entrepreneur is not easy.

And by the way, one may also not be the right person at a given time to continue leading the company. So bringing in the right people or transitioning to professional CEOs who can take the business forward is not a bad thing. If somebody says I’ve been building this company for five, 10 or 15 years, but now I want to try to build something else, they should have the freedom to do so.

That’s how Silicon Valley became what it is. They have entrepreneurs who built their first company, which may have failed or succeeded, but they built another company, and a third startup after that. Talent should be free to build new things and I think it’s very important to have this continuity of entrepreneurs within the startup ecosystem.

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