When we talk about building and strengthening the deeptech ecosystem, funding is a big part of the discussion. A multitude of new startups are entering the space and several technologies are reaching an inflection point. While the enthusiasm is clearly visible, all is not beautiful. Deeptech differs from other startups because technical due diligence needs to be done in a different way, the challenges differ due to the very nature of the technologies.
In addition, the market is larger and appetite is increasing in other geographies. And with the covid hitting us, what has been the impact? To address the topic of barriers to financing deep technologies, the second edition of the DQDeepTech virtual event invited Jatin Desai, Managing Partner, Inflexor Ventures, Shubham Sandeep, Director, pi Ventures and Xavier Parkhouse-Parker, COO, Cambridge Future Tech to shed some light on the subject.
How do the funds identify startups developing technology with significant disruptive potential and a large global market?
Desai believes the world is hungry for automation and innovation. Covid has acted as an additional catalyst for traditional industries to embrace the change. “We define deeptech as any emerging technology having a profound impact on society and this ranges from AI, machine learning, industry 4.0, space technology, etc. Two of the biggest risks associated with deeptech are:. We want these risks to be minimal.
We are also looking at the quality of the founder, the level of technological intellectual property and need to solve an Indian problem for the mainstream SME field and for the enterprise solution, we are looking at a global potential. We’re looking at technological architecture and design, ”he says.
Depth of technical due diligence and potential sizing of the market vis-à-vis other startups:
“From a market size perspective, the caveat is that there is a longer gestation cycle for deeptech startups, so the variables are much less set in stone, so you have to take that into account. Regarding technical due diligence, we do a series of in-depth dives structured as a brainstorming session. If you outsource a lot of discussions, you are struck by an incumbent bias and this is stronger with deeptech.
We at pi companies, forging an internal view using first principles thinking and remaining gaps, we go out and ask specific, pointed questions. Otherwise, we could fall into the trap of incremental innovation, ”says Shubham.
Obstacles to deeptech funding and action points to overcome them:
Xavier thinks the technology might be amazing, but the problem is getting stuck in the research mindset instead of turning it into a product. “The challenge is to determine what this product means in the future. Marketing the app is a challenge.
In addition, the cycle between research and product is long. You have to have investors and understand that it is patient capital, ”he adds.
“Indian universities are teeming with talent and have the advantage of capital efficiency in developing deeptech products. Indian universities are unable to support entrepreneurs from the start, which sometimes derails the path of innovation. The growth capital phase is where Indian deeptech startups fail. There is no permanent pool of capital in the Indian ecosystem to support deeptech startups throughout the lifecycle, ”adds Shubham.