Why does India need successful tech startups?
A little over two years back, Hemanth Satyanarayana, founder, and chief executive of a Hyderabad-based mixed reality startup called Imagination, wowed audiences when he provided a sneak peek into how people would interact and conduct business via virtual teleportation. He used an augmented reality (AR) headset to chat with a virtual ‘avatar’ of his colleague who was physically present in another room.
Another technology startup, Bengaluru-based Gnani.ai, is focused on speech recognition and natural language processing (NLP) in multiple Indian languages. “Our goal is to bridge the digital divide in India using a voice–the most natural form of communication. We use the core technology to develop multilingual voice bots and speech analytics in multiple channels such as web, apps or even on telephone lines,” says Ganesh Gopalan, Co-founder of the startup that is funded by Samsung Ventures.
Tech industry body Nasscom points out that there are hundreds of such technology startups that can be defined as “deep tech-based” companies. According to Milind Hanchinmani, Lead-DeepTech Club at Nasscom, “Over the past five years, India has witnessed the emergence of over 1,200 deep tech startups and the adoption of advanced tech is rapidly increasing at a 50% YoY growth.”
Of the estimated 7,500-odd technology startups, Nasscom defines these deep tech-based companies as those that have been “consistently working towards driving innovation in new age technologies such as AI, IoT (internet of things), Blockchain, Machine Learning, Cybersecurity, Augmented and Virtual Reality, among others”.
India desperately needs these deep tech startups in order to take digital transformation to the next level, arguing experts. Current digital technologies such as mobile, cloud, and customer relationship management (CRM) tools added functional capabilities such as connectivity, storage, and computing power in the digital transformation journey of any organisation and its processes, according to Jayanth Kolla, founder and partner of a deep tech research and advisory firm, Convergence Catalyst.
“However, emerging deep technologies, including Advanced Analytics, AI/ML, IoT (internet of things), and Blockchain, will add a layer of intelligence to a company’s systems,” he adds. According to Kolla, these technologies work in the background to make systems “smart, intuitive, self-reliant, customised and most importantly, continuously improving, which is the next level of digital transformation–the so-called digital transformation 2.0”.
Similarly, Bengaluru-based Coeo Labs makes medical devices that assist newborns and infants in breathing and prevent ventilator-related infections. According to Nitesh Kumar Jangir, Co-founder of the Bengaluru-based startup, “Any patient who is on a ventilator has around 25-30% chances of acquiring a deadly infection called Ventilator-associated pneumonia (VAP). More than 250,000 people in India die every year because of this infection.”
Kumar points out that while such patients are administered antibiotics, this also increases antimicrobial resistance, which will be the next big problem in healthcare. To address the issue, Coeo Labs has built a technology that can prevent this infection, which Coeo Labs has christened VAPCare. According to Jangir, Coeo Labs has already been granted patents in countries like the US, India, and China. “Our product is already USFDA approved. And this device uses high-end cutting-edge material science, sensor technology, and data analytics,” he adds.
Funding a Challenge
According to Jangir, deep tech is those areas where you do cutting edge research in all kinds of technologies, not just software or AI, but it also involves doing cutting-edge research in material sciences or in biotechnology. “These are not the things that are driven by lucrative business models or normal IT business models but these are technologies that have high IP (intellectual property) capability and have real contributions to knowledge and science itself,” he insists.
Deep tech startups, according to Joseph of CogniCor, are on the rise globally. He points out, though, that India lags behind on this front since most of the startups are from the US, Greater China, Taiwan, and Japan. He believes that India needs to create a more robust deep tech startup ecosystem and deep tech talent pool. The work done by the likes of Nasscom in creating the ecosystem is noteworthy.
“However, unlike Silicon Valley, the home-grown VCs are kind of reluctant when it comes to funding deep tech startups. The lack of funding can be a huge impediment,” says Joseph.
According to Kashyap Kompella, a technology industry analyst and CEO of rpa2ai Research, there is now an increasing number of deep tech startups in healthcare and pharma which are traditionally research and development (R&D) intensive industries. He cites the examples of Bengaluru-based Achira Labs (a technology platform for immunodiagnostic) and RichCore Life Sciences (that makes animal-origin free proteins and enzymes). He cautions, however, that “in the field of AI software, where the deep tech label is being liberally applied these days, one must take those claims with a pinch of salt”.
The challenges for deep tech companies include a “shortage of talent and fierce competition for available talent,” he said. “India is a STEM-rich country at the bachelor’s level but STEM-poor at the Ph.D. level.” He adds that deep tech companies have a longer lifecycle before they can scale and become commercial successes, hence they will need “patient capitalists” — venture capitalists whose horizon is longer than traditional VCs and who better understand the technology commercialization models and filter startups for investments based on their IP assets.
“AI comes in that – companies like Sigtuple, Niramai. These are all digital deep tech. In the beyond digital deep tech, a lot of innovation in India is happening in various things like life sciences. A company called Pandorum has developed an artificial cornea in the lab,” notes Singhal.
He points out that while it has never been easier to launch a start-up in India, there are still numerous challenges. “Two people get together and get some funding and start but all these deep tech companies typically have a slightly longer incubation time to become a business. Then, there is a funding paucity after they have gotten started to take them to a business of commercial value. That funding ecosystem is coming together slowly and we are doing our bit it in it,” Singhal says.
According to Satyanarayan of Imaginate, typically deep tech startups around the globe will get acquired by large companies if they do not have a “good follow-on series of funding”. He points out, thought, that in India, large technology companies do not seem to acquire deep tech startups “as much as I think they should”. This is because of the general tendency of “build rather than buy” in the Indian tech market which is still famous for outsourced or cheaper software development”.
Jangir believes that India needs the Flipkarts and Olas of the world of deep tech. “Right now, there is no one. More than deep tech, we need someone who has become a unicorn by selling hardware. We don’t have companies selling hardware,” he says.
According to Hanchinmani of Nasscom, as India’s public and private sector increasingly focuses on adopting next generation technologies, the demand for advanced deep tech and AI-related technologies will witness enormous growth domestically, thus creating an opportunity for start-ups and tech players to provide innovative products and services.
He concludes, though, that prowess in deep tech and AI will require focused attention and mentorship from the industry, academia, and the government.