India has emerged as the sixth-largest deeptech startup ecosystem globally, despite facing a substantial funding downturn, according to a recent study by Nasscom and Zinnov. The report, titled “India’s Deeptech Dawn: Forging Ahead,” underscores the resilience and growth of the sector, particularly in the realm of artificial intelligence (AI).
As of 2023, India hosts over 3,600 deeptech startups, with 480 new startups established in the past year alone—double the number from 2022. The report highlights that over 100 of these startups have developed intellectual property or innovative solutions in emerging domains. AI has become a major focus, with 74% of the deeptech startups in 2023 concentrating on AI, up from 62% between 2014 and 2022.
Despite the increase in the number of startups, the Indian deeptech ecosystem has not been spared from the global funding slowdown. In 2023, deeptech startups in India secured USD 850 million in investments, a sharp 77% decline from the previous year. This decrease is attributed to smaller average investment sizes at both seed and late stages and a cautious investor approach due to the extended gestation periods typical of these ventures. Both early and late-stage deals saw a reduction of over 60% this year. Additionally, 31 M&A deals were reported in 2023, a 45% decline, as the focus shifted to enhancing tech capabilities that provide the AI edge.
The report also highlights a growing emphasis on sector-specific solutions within the deeptech ecosystem. Four sectors have emerged as strategically important: space and defense, healthcare, automotive, and industrial manufacturing. Over 500 startups in these sectors are developing solutions for electrification, industrial robotics, surveillance and drones, satellite imagery, propulsion systems, and cancer diagnostics.
While most deeptech startups are concentrated in established hubs due to mature ecosystems and access to talent, there is notable growth in emerging hubs. More than 110 deeptech startups were launched in these emerging areas in 2023, marking a twofold increase from 2022 and the highest growth in the last five years. This expansion is driven by an expanding talent pool, cost advantages, supportive ecosystems, and proactive policies enhancing innovation in these regions.
“To rank among the top three deeptech startup ecosystems, India needs to support access to patient capital for deeptech startups to build and scale their products, forge strong R&D partnerships with academia for next-gen innovation, streamline government procurement for startups to build India-specific solutions, and implement the deeptech policy introduced in 2023,” said Kritika Murugesan, Head of Nasscom Deeptech.
India’s deeptech ecosystem stands at a pivotal point. Despite the funding challenges, the sector demonstrates promising growth and innovation, particularly in AI and sector-specific solutions. The report emphasizes the need for strategic support and investment to sustain and enhance India’s position in the global deeptech landscape. As the ecosystem evolves, a focus on sustainable growth, innovative solutions, and supportive policies will be crucial in driving the next phase of development for India’s deeptech startups.
source:
https://nasscom.in/knowledge-center/publications/indias-deeptech-dawn-forging-ahead
