95% of tech startups in India are software-related and less than 5% specialise in deeptech
Hardware startups, by nature, demand extensive research and development, leading to prolonged gestation periods
The Indian government has embarked on initiatives to bolster the telecom startup ecosystem
The telecom sector in India, the second largest in the world, is undergoing a remarkable transformation. As of July 2023, the country registered a subscriber base of 1.17 Bn, with a staggering 881.26 Mn internet subscribers, as per DoT.
On the flip side, a significant challenge casts a shadow over the industry: 90% of India’s telecom equipment demand is met through imports.
In this context, the emergence of indigenous telecom startups becomes pivotal to address this dependency, while also fostering innovation and economic growth.
Hardware Startup Challenges In India
There is a striking disparity between software and hardware startups in India. A whopping 95% of tech startups in India are software-related and less than 5% specialise in deeptech.
Hardware startups face multifaceted challenges, creating significant hurdles for their growth:
Extended Gestation Period And Funding Scarcity
Hardware startups, by nature, demand extensive research and development, leading to prolonged gestation periods. This protracted timeline poses financial challenges for both founders and investors, necessitating sustained funding over several years. As a result, they struggle to secure investments. Venture capitalists often prefer quicker returns, making it challenging for hardware ventures to fetch consistent financial backing.
Talent Acquisition And Skill Gap
Acquiring skilled talent is an enduring challenge. The limited pool of research talent is predominantly absorbed by multinational companies, leaving startups struggling to find resources with the necessary expertise for deep tech innovation.
Higher salary packages offered by big companies makes it even harder for start-ups to fulfil their requirement for skilled employees.
High Testing Costs And Infrastructure Limitations
The testing process for telecom hardware start-ups comes with significant expenses, and there is a scarcity of testing infrastructure as well.
As a result, startups face substantial financial challenges when trying to test and certify their products. Limited access to proper testing facilities further complicates the situation, hindering their progress and the growth of the industry.
Limited Domestic Supply Chains
The absence of a robust domestic supply chain hampers the hardware start-up ecosystem. Most component types, even those assembled in India, are sourced from international markets, highlighting a crucial supply chain gap that impedes the growth of indigenous hardware production.
Despite these challenges, the tide is turning for Indian telecom startups. The advent of 5G presents novel opportunities, inspiring them to explore areas like open RAN, Smart City solutions, AI and Edge technologies.
Major players in the telecom sector are actively engaging with startups, fostering collaborations and partnerships. This newfound synergy, coupled with government initiatives, is paving the way for a thriving telecom start-up ecosystem.
Government Initiatives: Nurturing Innovation
The Indian government has embarked on initiatives to bolster the telecom startup ecosystem. Recognising the dearth of testing infrastructure, the Department of Telecommunications (DoT) has opened government-owned labs for start-ups to conduct tests.
Further, the government has offered free access to 5G test beds for government-owned startups, aiming to boost innovation and experimentation. To back the startups with financial support, DoT approved a grant of INR 50 Cr to 43 startups and MSMEs for indigenous 5G equipment development through the Digital Communication Innovation Square initiative.
These add to the Startup India initiative launched in 2016, which aims to fortify the ecosystem for startups and innovation in India, contributing to substantial economic growth and employment opportunities.
Since its inception, 92,683 entities have been recognised as startups by the Department for Promotion of Industry and Internal Trade (DPIIT) as of February 28, 2023, facilitating tax exemptions and easier funding accessibility.
The initiative connects Indian startups to global ecosystems, provides government funding through a Fund of Funds with a corpus of INR 10,000 crore and offers mentorship along with incubation support.
The policy aims to nurture the research, development and innovation ecosystem by increasing gross expenditure on R&D, amending research assessment practices and creating partnerships for technology commercialisation.
Additionally, the policy emphasises strengthening India’s Intellectual Property Rights (IPR) regime by establishing a Single Window Platform for Unified IP Framework and enhancing global IP conventions. Targeted long-term funding is facilitated through thematically-focused Fund of Funds (FoF) and Technology Impact Bonds.
To address infrastructure challenges, the policy proposes infrastructure and resource sharing, promoting the use of existing infrastructure and establishing standardized field test sites.
By developing favourable regulations, standards and certifications through multi-stakeholder consultations and regulatory sandboxes, the industry can acquire the required momentum. Capacity building initiatives include skill enhancement grants, specialized courses, mentorship programs and international collaborations.
The policy also promotes procurement and adoption of deep tech products through quality-focused procurement, collaborative research models and subcontracting by large firms.
It enhances policy and program inter linkage by creating an Inter-Ministerial Deep Tech Committee, integrating deep tech startups into international trade agreements, and addressing import dependencies and supply chain vulnerabilities.
Additionally, the policy proposes funding mechanisms embracing the “failing by design” principle and a central core mission office to simplify procedures and enable IP protection.
Lessons From Global Markets
Around the world, major economies are strategically harnessing the potential of deep tech innovations and science-based startups to enhance their socio-economic competitiveness.
Initiatives like UK Catapult, Belgium’s WSL, Germany’s EXIST Program and Canada’s Innovation Superclusters Initiative emphasise collaboration, sector-specific focus, comprehensive support, funding access, internationalisation support and entrepreneurship education.
India aims to cultivate a thriving deeptech ecosystem inspired by these examples.
Looking ahead, the trajectory of India’s telecom industry appears promising. Projections by Deloitte India and CII suggest that by the end of 2023, the Indian telecom sector will reach USD 12.5 billion.
Technological advancements, coupled with the 5G rollout, industry collaborations and government support, are set to propel the telecom startup ecosystem further, ushering in an era of innovation and self-sufficiency in India’s telecom equipment production.