In an attempt to promote innovation and establish India as a global leader in deeptech, the government has announced that it will explore a dedicated fund of funds (FoF) for the next-generation startups. The Budget also proposed a Rs 20,000-crore investment to drive private sector-led research, development and innovation. This comes at a time when there is a growing demand for advanced technologies such as generative artificial intelligence (GenAI), quantum computing, blockchain, robotics, among others.
Earlier, Amitabh Kant, former CEO of NITI Aayog and G20 Sherpa for India, had also highlighted the need for a deeptech FoF. “The only way to capture the market is by launching new disruptive startups. Only way India can raise its GDP nine times is with the help of deeptech,” he had said.
The move aligns with India’s vision to lead the global innovation curve, ensuring that homegrown startups can compete at an international scale, said Prashanth Prakash, partner, Accel. He added: “The Union Budget lays a strong foundation for Viksit Bharat, driving transformative reforms that will redefine India’s economic and entrepreneurial landscape. A particularly exciting development is the exploration of a deeptech FoF, aimed at accelerating advancements in critical technologies such as AI, quantum computing and semiconductor research.”
Further, the government will also set up a centre of excellence (CoE) in AI for education with a total outlay of Rs 500 crore. This is on the lines of last year’s announcement of three AI centres for agriculture, healthcare and sustainable cities. Additionally, 10,000 fellowships will be granted under the PM Research Fellowship Scheme, supporting cutting-edge research at IITs and IISc. Experts believe this will encourage entrepreneurs to build solutions for domestic and global markets. “This is a pivotal moment as we close the AI talent gap, ensuring that India is not just a consumer of AI but a creator of cutting-edge solutions,” Mahesh Makhija, technology consulting leader, EY India, said.
Venture capitalists (VCs) believe these measures will drive deeptech entrepreneurship in the country. Anirudh A Damani, managing partner, Artha Venture Fund, says this is a game-changer for the country’s deeptech ecosystem. “Given the capital-intensive and long-gestation nature of deeptech ventures, we hope this fund is structured as a FoF, allowing experienced deeptech-focused fund managers to deploy capital effectively,” he said.
According to a report by VC firm Speciale Invest and alternative investment firm Oister Global, total funding in deeptech grew almost 3x from $484 million in 2021 to over $1.2 billion in 2022, but tapered to $677 million in 2023. The report also said that while India figures among the top ten markets for funding in deeptech globally, it still has a lot of ground to cover. Between 2016 and 2023, US deeptech startups received almost 60x times more investment than Indian counterparts, Chinese 12x and the UK startups grabbed 4x more.