Investors Foresee A Safe Bet On Deep-Tech Startups


Indian deep technology start-ups have become the most sought after bets for angels and venture capital (VC) funds for their potential to scale up rapidly and be able to offer an opportunity for early exit for the investors.

#DigitalErra Thought Corner

From the last one year, there is a lot of excitement in the investor community to back deep tech companies working on engineering innovation using augmented reality, machine learning and artificial intelligence (AI). While all other start-ups are eagerly looking for funds, investors are searching for AI start-ups that achieved meaningful traction and scalability.

According to the Markets and Markets report, global AI market is growing at 53.65 per cent to 5.05 billion by 2020 from $419.7 million in 2014. It is estimated to create $47 billion revenues and replace five million jobs by 2020.

Funding In The Space

Hyderabad Angels is evaluating several AI start-ups from the last one-and-half years.

“We are planning to finalize a couple of them in the next 2-3 months,” the angel network investment director P S Sreekanth said.

Similarly, Hyderabad-based early stage VC firm Endiya Partners has recently invested in a Bengaluru-based healthcare AI start-up SigTuple. It will be making more investments in similar start-ups in this year. Another early stage investor pi Ventures is also looking at AI-driven start-ups.

Besides, IDFC Parampara, an early stage fund, is in the final stage of evaluating two machine learning start-ups each in healthcare and cyber security domains. The deals may close in few months, Parampara Capital general partner Venkat Vallabhaneni said.

Deep-Tech Startups Enabling E-commerce

E-commerce involves a lot of intricacies which are yet to be tapped. There is a huge potential for tech companies to dive into logistics and delivery, getting AI or churning data for e-commerce. An investment in enabling companies helps build a robust supply chain. This creates a sound foundation for a company which learns to monetize and then look for customer acquisition. Also, tech startups are pure b2b space where the revenue traction kicks faster. This makes it more exit friendly than marketplaces.

“We have done couple of investments in e-commerce enablers such as Intelligence Email Marketing and Cloud based calling,” says Sanjay Mehta, Angel & PE Investor Director CORE Media.

An interesting aspect of this space is the investor’s use of independent scientific experts to assist them in scouting firms.

“It’s clear angel investors are driven to research and find the right start-up, and having access to management and subject-matter experts is a significant factor in making an investment decision,” said Lisheng Wang, Head of Investor Development and co-founder of Propel(x).

Tech Space Sees Change In Outlook

In the past, deep tech entrepreneurs struggled to communicate how their technology would directly impact user experiences. Emphasis was on figures of merit, such as efficiency and speed, and the rest was up to imagination.

Today’s deep tech companies spare no effort to communicate the product experience. Brilliant videos and animations communicating user experience with lessons drawn from peers doing SaaS and on-demand services. The amount of focus placed on communicating value to customers and end users mirrors their emphasis of delivering value over pushing the technology envelope.

Deep-Tech startups are more fertile grounds for discovery than ever and hence, investors see them as a safe bet for the future.