Speciale Invest’s Vishesh Rajaram On How Centre’s INR 1K Cr Fund Will Boost The Spacetech Economy

Amid an industry-wide demand for some financial support from the government for the country’s nascent spacetech ecosystem, finance minister Nirmala Sitharaman announced in her Budget 2024-25 speech that the Centre would set up an INR 1,000 Cr venture capital (VC) fund for the sector.

The finance minister said that the move is part of the Centre’s efforts to expand the country’s space economy 5X in the next 10 years.

While the announcement was welcomed by founders and investors from the country’s specetech ecosystem, they are now awaiting the fine prints. Allocation procedure for the fund and eligibility criteria are some of the major points on which the industry is seeking clarity to put speculations to rest.

Speaking to Inc42 about the announcement, Pixxel founder and CEO Awais Ahmed said that the VC fund can either directly make investments or the government might go for a fund of funds approach.

It is pertinent to note that the Centre runs a Fund of Funds For Startups (FFS) scheme, under which it has facilitated an investment of INR 18,000 Cr by the end of the financial year 2023-24 (FY24).

Meanwhile, Ahmed also highlighted that there would be a need for more funds in the future for the spacetech sector. “… the private space sector is still nascent, and we recognise that even larger funds will be needed as the sector grows — eventually, an INR 10,000 Cr fund (might be needed),” he said.

Inc42 spoke to Vishesh Rajaram, managing partner at Speciale Invest, to understand the implications of the announcement for setting up the VC fund. 

Speciale is one of the leading spacetech investors in the country and counts the likes of Agnikul Cosmos, GalaxEye Space, Kawa Space, Astrogate Labs, and InspeCity in its portfolio.  

Here are the edited excerpts from the interview with Speciale’s Rajaram…

Inc42: As one of the leading VC funds in the spacetech sector, how do you look at the government’s step to establish an INR 1K Cr VC fund to boost the space economy?

Vishesh Rajaram: First of all, let me put a disclaimer. I am an optimist. We have looked at the Budget every year, and this is the first time such a fund has been created. 

So, to me, the quantum is incidental. The move from the government to say that this is a sector that needs support and its decision to put aside some amount of money is a strong validation. It shows the government aims to make this sector an important part of the economy.

A large part of India’s burgeoning spacetech market includes building from India

for the rest of the world. This is actually an export market for us and that’s going to need a lot of work and support through different aspects. 

The FDI policy that came in February was a strong signal that the government and the policy framework is welcoming international capital participation.

The creation of IN-SPACe and the policy framework for private companies to find a way to leverage the infrastructure capability and competency of Indian Space Research Organisation (ISRO) via IN-SPACe is another strong validation.

So, if you consider all these things, it is clear that the government is taking incremental steps and is realising the importance of the space sector and the support it needs.

So, as an existing investor in this category from 2018-2019, I think, it couldn’t get any better.

Inc42: What do you think the allocation strategy of this fund is going to look like? 

Vishesh Rajaram: There’s too much speculation at this point and it’s difficult to predict right now. However, if we go back in history, the government has a fund of funds programme through SIDBI that has invested in other funds.

If we look at IN-SPACe, it has a seed fund programme to invest small amounts of money in startups. But at this point, it will be pure speculation to figure out which will be the nodal agency to do it. 

But the focus is clear, the entire amount of money is set aside for entrepreneurs building for spacetech from India for the world. I am sure the Centre will put together the mechanisms of fund allocation in due course.  

I think this fund will have a multiplier effect.

Inc42: So, do you think this step to create a VC fund will encourage more investment from other participants in spacetech? Should the government have allocated a higher amount for the sector?

Vishesh Rajaram: If the government is willing to put in so much money, I am sure there will be participation from both domestic and international investors.

The real reason deeptech is not chosen by many is that there are a lot of technical risks involved, which sometimes lead to high gestation periods to build products. So, I don’t think every fund is going to do deeptech. 

Now, India is beginning to see more of such funds investing in deeptech sectors but it will always be a smaller market compared to the consumer market. So, the government’s step to focus on each sector separately is the right approach because there cannot be a one-size-fits-all model in a country of our size.

If the government puts in INR 1,000 Cr, it will make a bunch of other people think about this more seriously as a sector. It also sends a very positive signal internationally for investors to consider participating in the space sector in India.

If companies perform well, I am confident that more capital will come for the sector. 

Inc42: Which spacetech startups do you think would benefit the most from this financial boost?

Vishesh Rajaram: The upstream ones are building more hardware and the downstream ones are building more software. So, of course, hardware ends up taking more money than software, at least in the initial years. 

As such, upstream companies would want to raise capital from this type of vehicles and are likely to be the bigger beneficiary.

Inc42: How are you looking at the international focus on India’s spacetech sector?

Vishesh Rajaram: India has had a strong competitive advantage when building from here for the rest of the world, given the country’s talent base, credentials, and infrastructure that has produced some of the top companies in the space sector.

Besides, the Indian market is also growing. However, right now the focus is on growing our share in the global space market.

From my vantage point, international investors are looking at the Indian spacetech sector very positively. Some of them have been investing in the country’s spacetech sector even before the government made the announcements for the sector. This gives an idea of the reputation ISRO has built. Many of our companies benefit from the fact that they come from India, where ISRO operates. 

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