What is holding back India from spawning global tech disruptors like Tesla, the iconic American electric car and cleantech company, or BioNtech, a German company that came up with the new mRNA-based vaccine to combat COVID-19?
If companies from India are to transition from a volume play to a value play and look beyond low cost, greater efficiency cycle and seek an orbital shift in capital and wealth creation then investing in ownership of intellectual property is the path to pursue and deep tech, the vehicle to ride on.
Why Deep Tech
Deep tech, very loosely, is a space where companies work on technologies like Artificial Intelligence (AI), Machine Learning, Blockchain, genomics and use engineering innovation and build it into their core. As is apparent, it requires technical expertise and therefore tends to be driven or founded by smart engineers. Therefore, by this very nature, it runs across sectors.
This is a distinctly different path than the one taken so far. Thus far, the India story – be it in IT or pharma and health care – has been largely that of as a volume play and in IT, a services play, which also throws up wealth creation but the spin-offs are disproportionately higher when riding on the strengths of product and IP-ownership. A case in point: Tesla’s market cap, which is nearly double, if not more, than that of some of the other iconic and long-standing car makers of America.
The good news at the moment is that there seems a growing interest in this space in India and greater clarity and focus among the various stakeholders to look towards creating an ecosystem that can spawn deep tech-driven disruptors.
A Growing Interest
According to a recent study by Nasscom, today 19 percent of all the startups in India are leveraging deep tech to build more complex and smart solutions with Bangalore, Delhi NCR, Mumbai, Pune, Chennai, and Hyderabad as important hubs. The bulk of these deep tech startups are into enterprise technology (29 percent in all) followed by 8 percent in fintech and nearly the same amount in healthcare. The study also finds that 87 percent of total deep tech investments in 2020 were in AI start-ups with AI, IoT (Internet of Things), and big data analytics emerging as the most preferred technologies.
Where India Has An Edge
Kris Gopalakrishnan, the co-founder of Infosys, who is today widely regarded for a leading role in actively backing research projects – be these at the IIT (Indian Institute of Technology) Madras or brain research at the Indian Institute of Science, Bangalore, feels, “we need to pick and choose areas or strategic sectors where we will be globally competitive and then invest in research capability, supply chain and seek suitable regulatory support.” Others, of course, also see the need to nurture talent with academic institutions willing to support students with suitably designed courses and provide industry linkages.
He feels, Indian companies could leverage the strengths and capabilities in biotech, a space where we already have a good R&D infrastructure and talent. Or even in automotive, particularly two-wheelers, where we lead in volumes and could now look at the value-play. Then there could be other areas like medical instrumentation and medical devices.
Incubator & More
To address some of these issues and perhaps provide a platform of sorts, Gopalakrishnan says an idea was set in motion about six months back to create a deep tech incubator and this led to the setting up of ‘India Deeptech’, an alliance between deep tech startups, incubators and venture capital funds to promote deep tech startups in India. It describes itself as one that tries to “bring together all the elements of the ecosystem in India under one roof with the objective to enable creation and scaling of more startups focused on scientific research and engineering innovation.” Axilor, where Gopalakrishnan is a chairman is one of those backing ‘India Deeptech’ apart from others like Blume Ventures, Chiratae Ventures, and others.
But then Gopalakrishnan sees it as one of the enablers and feels, there are other elements in the value chain that are equally important. If in the US, incubators within academic institutions in Boston or Pittsburg or say at the Cambridge Science Park in the UK, play a crucial role, India needs to build on its research clusters, invest in translational capabilities to take products from a laboratory to market, create scope for accelerators and incubators, design special funds, offer more research grants aided by suitable government policies that can drive deep tech start-ups to follow the lead from their global role models and disrupt the market with their own products and solutions. “There are also now funds focussed on IP creation and deep tech,” says Gopalakrishnan.
These areas, he is also quick to add, are also high-risk and high-reward spaces. For instance, the industry is experimenting with hydrogen-powered vehicles but which one will win in the long-term and which technology will be better is difficult to predict at this point in time.
Use Cases For Industry Verticals
“What India needs from the deep tech space is companies that can showcase an integration of technologies and create use cases for industry verticals with workable business models and end up expanding the footprint of solutions,” says Sudin Apte, a highly regarded tech sector analyst, formerly with Forrester and Gartner and currently the CEO and research director at Offshore Insights.
Time for India
Estimates vary but some within the industry see India having at least 500 to 700 companies looking seriously at deep tech. “If you look at every deep technology company, it happens to be either in US or China and perhaps some also in Israel but not really from India and our hope is that we will be able to help a lot of technology coming out from institutes, see small startups emerge, scale-up and hit IPOs,” says Arpit Agarwal, director and one who is focused on deep tech at Blume Ventures.
But then, for those seeking to wait for enablers to fall into place, may do well to study the story of BioNTech and its scientist couple founders and their arduous journey into the limelight. It is arguably a stellar example of how persistence pays.
Graphic source: Nasscom