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India Slowly Warms Up To Its Promising Deep Technology Startups

India has witnessed a startup revolution in the past decade, spearheaded by the likes of consumer-centric companies such as Amazon, Flipkart, Snapdeal, Ola and Myntra. Now, the trend is veering towards deep technology startups, as solutions powered by advanced technologies such as virtual reality, artificial intelligence and machine learning are grabbing the attention of investors.

The uphill climb to raising funds

Indian investors have taken their time to warm up to deep technology startups, according to many startup founders. The trend has largely been in favor of e-commerce, but now early stage investors are actively backing advanced technology products and solutions.

Dr. Nitin Kale, co-founder and chief technology officer and Kapil Bardeja, co-founder and director of Mumbai-based Nanosniff Technologies began their journey in 2011 from Indian Institute of Technology’s (Bombay) incubator, making micro-cantilever and micro-heater based technologies for various micro and nano-scale sensing applications. Bardeja says, “Back then, most of the investors didn’t understand deep technology. They were not confident of the results we were hopeful of achieving, and were hesitant to fund us.” This year, they raised an undisclosed amount from crowd-funding platform 1Crowd and its investor community, in addition to funds from marquee investors as well as grants from the government’s Department of Biotechnology (DBT) and Department of Science and Technology (DST).

Hyderabad-based NicheAI was founded by engineers Soham Acharya, Saurabh Arora and Venkatesh Mondi a year-and-half ago. They recently raised US$15,000 from IIIT-Hyderabad and 50K Ventures. Acharya agrees that it is challenging for startups to develop path-breaking innovation in advanced technology in India as deep learning involves high computation costs. Since deep learning is a futuristic concept, the learning is ongoing and requires significant capital and time, he says. Added to this, lack of investor confidence and knowledge about deep technology makes it harder to raise funds meant to sustain the cost of technology development.

Investor interest rises

The trends are changing in India now, as investors across the spectrum are beginning to pay close attention to futuristic technology startups that are emerging rapidly. In 2016, e-commerce giant Flipkart’s founders Sachin Bansal and Binny Bansal invested in Bangalore-based biotechnology start-up Pandorum Technologies, which designs and manufactures human tissue for medical research. In March this year, leading technology VC fund IDG Ventures India, along with Axilor Ventures launched its Frontier Tech Innovators Program to partner with disruptive deep technology startups.

Sateesh Andra, managing director of early stage venture capital firm Endiya Partners, says, “India’s start-up ecosystem is definitely changing, and the technology startup pool is increasing. For investors to stay ahead of the curve, it is important to have domain expertise to understand the technology better, identify opportunity areas within a sector and invest in start-ups that can address these problems.” Andra has spent more than 15 years in San Francisco where he founded a startup called Euclid and played a key role in raising more than US$35 million. Some of his past investments include Little Eye Labs, (acquired by Facebook), Seclore and Cleartrip. Endiya Partners has invested in deep technology start-ups like Hansel and SigTuple.

Among the advanced technologies forming the core of product development by startups, artificial intelligence (AI) appears to be quite popular, says Bardeja. A joint study by PwC and the Associated Chambers of Commerce of India (ASSOCHAM) reported that Indian startups are actively pursuing AI. According to Barkha Sharma, CEO and founder of AI-powered HR automation tool Bash, knowledge sharing by corporate bigwigs on advanced technology can have a positive impact on investor sentiment. “Companies such as Amazon and Microsoft are enablers and they can play a more active role in breaking down the role of AI and their impact on business. This will go a long way in influencing investors.”

In addition to having domain expertise, it is equally important to have “patience capital,” suggests Rohit Chokhani, principal partner of Mumbai-based White Unicorn Ventures. “New-age investors want to make a quick buck but it is important to see the technological evolution of a product, which will take time.” He agrees that early stage and seed fund investors are showing a marked interest, but the community is yet to witness a significant round of funding.

Incubators bridging the gap

While deep technology developers feel investors don’t understand their product, investors believe pure technology products lack commercial value and impact. This has allowed startup incubators to play a definitive role in shaping the trajectory of India’s technology ecosystem. Srinivas Kollipara, founder and chief operating officer of Hyderabad-based start-up incubator and corporate innovation specialist T-Hub explains that his organization is keen on nurturing deep technology disruptive start-ups by helping them scale. This is done by assisting them with market access, new revenue models and channels, and refining their sales pitches. “It’s not just about presenting technical jargon about a product to investors, but engaging them with a story that they can connect with. We help start-ups analyse real-time business challenges and align their solutions to address them.” T-Hub works extensively with corporate entities to match them with appropriate startups that can address their specific challenges through tailored programs. Kollipara says it is an exciting time to see start-ups in healthcare, fintech, smart cities and cyber security breaking barriers, as they weigh in on economic and social challenges, and actively address them.

India’s start-up ecosystem is third globally and has the fastest growing base of startups worldwide, states a NASSCOM report. Technology continues to dominate preferences for investors and product creators, but there’s opportunity for the country to capitalize on a focused technology pool and establish itself as an innovator.

Sindhuja Balaji

https://www.forbes.com/sites/sindhujabalaji/2017/07/03/india-is-slowing-warming-up-to-its-promising-deep-technology-startups/#6c9b97bc6159