India’s Deep Tech Innovators Face Funding Frenzy
- Sameer Joshi, CEO of NewSpace Research and Technologies (NRT),
- urged Union Commerce Minister Piyush Goyal to address the lack of patient capital for deep tech companies like NRT.
- “VCs love the food delivery guys, yes. GFR and L1 in #DeepTech also hurts…,”
The struggle of deep tech innovators to secure the long-term funding needed to soar has become a pressing challenge facing India’s aerospace and defense sector. In a pointed post on X, Sameer Joshi, CEO of NewSpace Research and Technologies (NRT), highlighted the need for patient capital to support companies like his. As India aims to cement its place in the global aerospace race, Joshi’s words underscore a broader tension between the desire for rapid growth and the necessity of long-term investment.
The Innovator’s Dilemma
Long-Term Funding Needed
Deep tech innovators like NRT face significant hurdles in securing the patient capital required to drive innovation. Unlike consumer tech startups, which promise quicker returns, deep tech firms require substantial upfront investment and often take years to generate returns. Venture capitalists (VCs) tend to favor sectors with faster scalability and clearer exit paths, leaving deep tech companies like NRT struggling to access funding.
Why Venture Capitalists Prefer Fast-Scalable Sectors
- VCs prioritize sectors with faster scalability and clearer exit paths, such as food delivery apps.
- These sectors often have lower risk profiles and quicker returns, making them more attractive to investors.
Systemic Barriers to Deep Tech Innovation
Systemic barriers within India’s procurement framework also hinder deep tech innovation. The General Financial Rules (GFR) govern public spending, often prioritizing cost over innovation. The L1 (lowest bidder) criterion, a cornerstone of government contracts, awards projects to the cheapest bidder, sidelining firms like NRT that invest heavily in research and development (R&D) and may not compete on price alone.
Need for Patient Capital
Deep tech startups in aerospace and defense require long-term funding to scale and achieve success. However, they often face a funding crunch due to the lack of patient capital. NRT, for example, has raised $73.2 million over 11 funding rounds but still needs significant investment to reach its goals.
The government has taken steps to address the funding crunch faced by deep tech innovators. Initiatives like the Innovation for Defence Excellence (iDEX) scheme support startups, and the Union Commerce Minister’s announcement of a?10,000-crore Fund of Funds scheme focuses on deep tech.
The struggle of deep tech innovators to secure the long-term funding needed to soar is a pressing challenge facing India’s aerospace and defense sector. The government has taken steps to address this issue, but more needs to be done to create a favorable funding environment for deep tech companies.
Statistics
| Year | Indian Startups Received ($ billion) | Chinese Startups Received ($ billion) |
|---|---|---|
| 2014 | 0 | 0 |
| 2015 | 4.2 | 0 |
| 2016 | 4.7 | 0 |
| 2017 | 5.3 | 0 |
| 2018 | 6.5 | 0 |
| 2019 | 8.1 | 0 |
| 2020 | 9.5 | 0 |
| 2021 | 12.5 | 0 |
| 2022 | 15.6 | 0 |
| 2023 | 18.5 | 0 |
| 2024 | 20.1 | 0 |
| 2024 | 16.0 | 845 |
This article highlights the challenges faced by deep tech innovators in India’s aerospace and defense sector, emphasizing the need for patient capital to support companies like NewSpace Research and Technologies (NRT).
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