Deep Tech Startups: Investors Lack Patience

Bengaluru, March 28 (PTI) When it comes to deep tech startups investors are not patient enough, said representatives of the Nano Centres at Indian Institute of Science, Bengaluru and Indian Institutes of Technology (IITs).

The Nano Centres, which are driving India's edge in the deep-tech race, fostering breakthrough technologies and strategic advancements, were established by the Nano technology Initiatives Division of the Ministry of Electronics and Information Technology (MeitY).

This forces faculty members, who are supposed to be doing research, to build startups, the professors said.

The professors were addressing a session at India's first Nano Electronics Roadshow, organised by MeitY in partnership with IISc, and IITs in Bombay, Madras, Delhi, Kharagpur, and Guwahati on March 27.

"Deep technology can have a future after 10 or 20 years. Market has no understanding of that," said Prashant Mishra, professor at Department of Biochemical Engineering and Biotechnology, IIT Delhi.

"Typically, given that there are a lot of software startups in India, the venture capital world is used to getting returns within maybe two years," said Professor Srinivasan Raghavan from IISc, Bengaluru.

"But if you are doing deep tech, you're actually fabricating devices. It's like buying a circuit board and making the transistor, it'll take time," said professor Shanti Bhattacharya from Department of Electrical Engineering at IIT Madras.

Raghavan said when he returned from the US in 2005 and joined IISc, he had naively thought it was possible to teach, do research, and do startups in India too, as it was common in the US.

"I think it's definitely not easy at all in the Indian ecosystem to be doing all these three things together. But given that's the trend globally, the government has been pushing academics to technologies. We've bent our backs and done it."

He did acknowledge even given the constraints, this has worked out in India's favour so far.

"About 14 startups from the Nano Centres, which was created from a list of about 30-odd that pitched, many of them are actually revenue positive now," said Raghavan.

According to him, funding is also the biggest gap in scaling technology in India.

"We need initial funding to scale up things from the lab/startup, and only then can we think of commercialisation," explained Professor Deepak Goswami, Chairperson, School of Nano Science and Technology, IIT Kharagpur.

"In the US, there is a grant mechanism that sustains most of their deep tech startups. This doesn't exist in India," added Raghavan.

He said this makes a huge difference as when a grant is awarded, there is no equity dilution.

"If you're a deep tech startup and you have to raise funding from venture capital firms you have to dilute equity. Very soon, the founder has less than 26 percent of the company and loses incentive. That is an issue," said Raghvan.

Professor Swaroop Ganguly, from IIT Bombay, who is associated with more than one startup, and is also the part of the advising team of Soilsens, which won the Best Startup Award at the roadshow here, said, even when there is investment it is suboptimal.

Bhattacharya also said while procuring funding, deep tech is further classified and that there exists, what investors refer to as "deep, deep tech".

"If you're making devices which are at some level simple and can directly become sensors, I think there's a lot of funding for that," said Bhattacharya, But, say, for a dialysis project being undertaken by her colleagues in IIT Madras, it is not easy to get funding, she added.

"This is a disruptive technology. It's different from what exists, and the kind of safety levels of tests you have to do are different too," said Bhattacharya.

Another great challenge, said the professors, is the supply chain.

"We are dependent on people abroad," said Raghavan.

He pointed out that if something broke down in the US, if you have ordered it by 4 pm, by 8 am next morning, it would be there.

"You would fix things and move on. But if something breaks down in India, your tool is down for six months. Semiconductor devices' manufacturing is a process flow -- it goes from one to the other. So, your process flow is down too," said Raghavan.

His advice to overcome this is to insist on the "twin line".

"Set up a line that contains two of every tool. That's a change in model that we need to have in India," he reiterated.

The experts also talked about how it is essential to grow the market so that it can absorb what these deep tech startups will be putting out.

"What experience has taught me is that, it's one thing to make something on a large scale, and another to make a product and sell it to another person.

Now, for that to happen, that product has to go through tremendous qualification. For that, we have to be clear that we will compete globally," said Raghavan.

Scaling up also takes a lot of energy, added Mishra of IIT Delhi.

"Some of the technology can be transferred in one month or a year. But some, like healthcare technology, may require five years or so because of many regulations," he added.

According to him, it is also not that the industry will accept something with cost-effective technology readily.

"Because they might have spent millions of dollars on the existing set up. So, what they will do is that they will buy this technology and not allow it to come to market. That's the way things happen now," said Mishra.