Deep-tech startups in India: Investment insights into AI, Blockchain, and IoT Ventures
By Rahul Gupta, Founder and Managing Partner, ValuAble
India’s deep-tech startup ecosystem is experiencing phenomenal growth, with over 3,000 startups pioneering solutions across diverse sectors. Deep tech, or deep technology, refers to innovations rooted in scientific discoveries or engineering advancements. It has significantly impacted agriculture, life sciences, green energy, aerospace and other industries. Deep tech uses complex science and engineering to create groundbreaking solutions. It’s like building on a solid foundation of knowledge to develop innovative tools for the future!
Spearheaded by fields like Artificial Intelligence (AI), Blockchain, and the Internet of Things (IoT), these disruptive technologies are reshaping landscapes and tackling complex challenges. Around one-third of deep-tech startups focus on enterprise technology and the Banking, Financial Services, and Insurance (BFSI) sectors.
The deep-tech revolution: A force for change
The deep-tech revolution in India is undeniable. As the world’s third-largest startup ecosystem, the nation has witnessed a remarkable surge in deep-tech ventures. Investments in these startups reached a staggering $1.8 billion in 2022, reflecting a significant 60% increase y-o-y. Fuelling this growth is India’s expanding talent pool, which is renowned for its skills and cost-effectiveness. Additionally, government initiatives like Startup India and Digital India have provided a much-needed boost, creating a fertile ground for entrepreneurship and innovation.
However, challenges remain. Deep-tech ventures often need more access to long-term capital, essential for the significant research and development (R&D) required before achieving commercial success. Regulatory ambiguity and a lack of specialised infrastructure further complicate the landscape. Overcoming these obstacles through collaborative efforts from policymakers, investors, and industry stakeholders is crucial for fostering a robust deep-tech ecosystem.
Investing in the Future: Exploring Key Deep-Tech Sectors
1. Artificial Intelligence (AI): Powering progress
AI holds immense potential to transform India’s healthcare, agriculture, finance, and manufacturing sectors. Startups like Niramai are leveraging AI for early breast cancer detection, a significant breakthrough in a nation burdened by high cancer rates. These ventures employ cutting-edge technologies like machine learning, natural language processing, and computer vision to develop innovative solutions for real-world challenges. According to a report by Accenture, AI could add a staggering $957 billion to India’s economy by 2035.
Investment trends in Indian AI startups are positive, with over 50% focusing on interface layer solutions. However, due diligence is paramount. Investors must carefully evaluate the founding team’s expertise, data security measures, and regulatory compliance, especially in sensitive sectors like healthcare and finance.
2. Blockchain: Revolutionising Trust and Transparency
Blockchain technology can potentially revolutionise various sectors in India, from supply chain management and identity management to digital voting and financial services. Indian blockchain startups are exploring innovative use cases like smart contracts, Decentralized Finance (DeFi), and asset tokenisation. Service layers and solutions around value chain tracking, smart contracts, and digital identity dominate the Indian blockchain landscape. While the investment landscape for blockchain startups is nascent, it’s rapidly gaining momentum.
A recent report analysing market opportunities and risks in blockchain technology across various sectors in India predicts a Compound Annual Growth Rate (CAGR) of 47.3% in spending on blockchain, reaching an impressive US$4,348.3 million by 2025. However, investors in this space must thoroughly understand the underlying technology and its potential applications. Scalability, regulatory clarity, and project legitimacy are vital considerations, as the blockchain space is susceptible to speculative projects and potential scams.
3. Internet of Things (IoT): Connecting the World, One Device at a Time
IoT has far-reaching applications in India, particularly in smart cities, connected infrastructure, and industrial automation. Startups like Arya.ai are developing asset tracking, predictive maintenance, and energy management solutions, optimising operations and resource utilisation. According to industry reports, platform and network layer solutions account for over 50% of IoT offerings in India, with home automation products and energy management platforms leading the charge.
Evaluating device security, data privacy measures, and interoperability between IoT systems and platforms is crucial for investors. Given the vast number of connected devices and the sensitive nature of the data they generate, robust cybersecurity protocols and adherence to data privacy regulations are paramount. Those who can navigate these complexities and identify startups with innovative solutions, robust security, and strong interoperability stand to gain significant rewards in this rapidly growing market.
The Road Ahead: A promising future for deep-tech investments
The future of deep-tech investments in India is undeniably promising. There’s likely to be an increasing focus on deep-tech ventures that address social impact areas, such as healthcare, education, and sustainable development. Investors who can identify and support such startups early on could reap significant long-term returns and contribute to a better future for India. With the right support ecosystem, access to capital, and a forward-thinking approach, India can solidify its position as a global leader in deep-tech innovation, driving economic growth and solving critical challenges for its citizens and the world.
