Funding Crunch in Deeptech
Funding is an indispensable part of any startup. As new technologies are surfacing like Virtual Reality, Game Development, AR, XR, GAN, blockchain, deep tech, 3D printing, ML etc. to transform business models there is a constant need to adapt to new things. They help to tailor-made addressing unique situations and problems the Indian business market faces. With development being the buzzword India is very much running the rat race. Till date, it has been fortunate to treasure 27 unicorns. The hope is to earn more of them and to lead the market in the long run. However, this success reminds that none of the unicorns are from the field of deep tech. Most of the unicorns present in India have their entities present in the foreign market. This is because of the easy funding, developed infrastructure, rules and regulations and tax norms. India has a long, long way to travel till it earns its deep tech unicorn.
Condition of the Indian market
India stands behind China, Japan and the US in the market of deep tech. Records of the past indicate that 2018 had been a milestone year after 2015 and 2016 seeing irrational exuberance which had created a funding gap. In that year the Indian startup ecosystem received $11 billion. Although the year 2018 witnessed a decline in deals as well as funding from that of 2017. 48 percent of the received funds were lapped by 1.4 percent startup companies with the rest 52% funding being raked by 1 percent startups. Reports by Inc42 DataLabs reveal that the Indian startup ecosystem has received $3.42 billion in the beginning quarter of 2019. The deep tech ecosystem was blessed only with $9.58 million out of the total $958 million (merely one percent of the total amount).
The competition in the Indian market is getting tough. With increasing number of companies in the Indian market ecosystem, the need to raise more funds in deep tech is the need of the hour. Conversely, it is the only vertical in the startup market to receive the least ever funding, even lesser than the quarterly average forcing several players to bid adieu. Quite obviously India is facing tough challenges that its foreign contemporaries have never confronted with.
The players of the deep tech ecosystem such as IoT, ML and AI are being leveraged from almost all the sectors. Health, security, legal and logistics, etc. are at the forefront that is making use of such technologies. In fact, the number of companies has grown due to increased efficiency.
To ensure prompt growth of the sector the venture capitalists or VC need to be capable enough to back the startup companies. Only then further growth in the industry would surface in the year 2020 and the decade following thereafter.
In the TiE summit held recently, the industry leaders expressed similar views. They opined that due to lack of institutional support this industry is seeing a tough time. In fact, many agreed that the industry is not even counted as one among the several primary objectives of the whole startup ecosystem. As per Tracxn, a research firm, the year 2019 has been a boon. The nation witnessed $14.5 billion Local tech startups, in comparison to $10.6 billion of 2018. The startups participated in more than 1180 financing rounds, out of which 459 of them were graded in Series A or later rounds by 817 investors. Other startups who participated in pre-Series A or angel investment were successful to raise $6.9 billion.
Active Investors in the current market The most active venture capital fund of the startup ecosystem is Sequoia Capital with more than 50 investments and co-investments. Other top VCs are Tiger Global Management, Chiratae Ventures, Accel and Blume Ventures. Private equity funds were led by Steadview Capital alongwith nine startup investments. Even General Atlantic invested its finances in four startup companies, turning into a profitable edtech startup. 2019 has also seen the arrival of several direct investments from the banking and corporate sectors. The good news is the funding market was much of a success to help businesses find access to working capitals through 176 horizontal marketplaces, more than 160 fintech startups, 150 educational learning apps, 120 trucking marketplaces, 82 riding services, 42 platforms of insurance, more than 33 used car listing providers and over 13 startups. The year also saw rise significant increase (almost 22 percent) in the ability of struggling companies to attract investors to help them accomplish their financing deals. Consequently, the increment in valuation was 15 percent.
To sum up It is for sure that India wants to carve out its niche among the world's top economies. However, only desires won't help. Suitable inputs from the Indian government would be necessary to take the big leap. Even startup ventures in India might have to reconsider their plans and think in the way global leaders do. Both hand-in-hand (i.e., the government and individual companies) would surely pave way for a successful tomorrow. And let's say another unicorn might add to the prestige of the country. So, India it's time to plan its next move! Show the world what you got!