Deep tech in India is attracting investors with deep pockets

The application of deep tech has been helping Indian enterprises to not just overcome challenges but also expand their footprint.

It is an established fact now that the coronavirus pandemic set in motion a large-scale digital adoption across India. Even businesses that had avoided technology until then suddenly made the leap to the digital world. Suddenly e-shopping. Working from home, online schooling and video conferences became the new norm. What’s more the digital wave swept across sectors enabled by the popularity of smartphones and data. For those who had scoffed while watching Robocop on television, suddenly found themselves face to face with robot nurses, as they hurtled across corridors providing much needed patient care. AI was harnessed to create track and trace programmes to map out the spread of the pandemic and drones to took to sky sanitising streets.

India’s deep tech ecosystem. in particular, has been developing steadily over the past few years, its growth – not surprisingly – being spearheaded by the country’s burgeoning start-ups sector.

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Deep tech start-ups across sectors have come up with have been innovating to solve challenges in society not just in India but also in international markets like the USA, Europe and Japan. According to ET, 19 per cent of tech start-ups in India are leveraging deep-tech solutions to build product competencies for market expansion. With over 1,600 tech start-ups and a record 12 additional unicorns (start-ups valued at more than $1bn) added in 2020, the highest ever in a single calendar year, the Indian tech start-up base is witnessing a steady growth at a scale of 8-10 per cent year-on-year. Furthermore, 14 per cent of total investments in 2020 were in deep-tech start-ups, up from 11 per cent in 2019, with 87 per cent of all deep-tech investments being in artificial-intelligence machine-learning start-ups.

Factors influencing growth

The easy availability of mobile phones and wide-spread penetration of both mobile network and data have hurtled the average Indian full pelt into the digital age. Smartphones in particular are fuelling digital consumption whether it is online shopping, gaming or even learning online.

India’s large talent pool too is a contributing factor. While India has always been known as amongst the top in the world for IT talent (particularly in services area), the shift towards IP, SaaS and innovation-based entrepreneurship is slowly building a strong foundation for India’s digital sector. “The resilience and fortitude demonstrated by the Indian start-up ecosystem in 2020 was unparalleled and unprecedented,” said Pari Natarajan, CEO, Zinnov told ET. “It was about defying the odds with extraordinary innovation and exceptional leadership. 2020 saw start-ups increasingly leveraging and piggybacking on the foundational infrastructure that the government has in place – the India Stack.”

The role of start-ups

In 2020, while the world quivered under the grip of the Covid-19 pandemic, Indian tech start-ups not only managed to stay afloat but also strategically converted crisis into opportunity through innovation and technology. As a result, the digital maturity of Indian enterprises has jumped from 34 per cent in 2018 to 55 per cent in 2020.

According to a NASSCOM tech start-up survey, remote working continues to see significant adoption among tech start-ups, with around 30-35 per cent offering remote roles and 15-20 per cent of companies having committed to the remote work culture. Tech start-ups are now expanding into global markets with 28-30 per cent targeting the overseas market for growth and business expansion. Deep-tech and new start-up hubs will continue to grow at 40-45 per cent CAGR. While the investments in 2020 were significantly lower than in 2019, recovery in deal pace and investments is expected to return to 2019 levels, if not exceed in 2021, according to NASSCOM.

All the signs point towards cautious optimism. In fact, Pari Natarajan, CEO, Zinnov, states that “2021 will be the ‘Decade of Collaboration’ where entrepreneurs engaging more with not just their peers but also with the government, corporates, and the manufacturing ecosystem, will catapult India’s dreams of becoming a trillion-dollar economy.”