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India’s burgeoning deeptech sector now boasts over 3,600 startups, securing the sixth spot in the global deeptech ecosystem, according to a recent study by Nasscom and Zinnov.
The report, titled “India’s Deeptech Dawn: Forging Ahead,” sheds light on the significant growth and challenges faced by the sector.
Rapid Growth in 2023
The deeptech landscape in India saw substantial expansion in 2023, with over 480 startups being established, a figure that is double that of 2022. Of these, more than 100 firms have developed intellectual property or innovative solutions in new domains.
Focus on AI
A notable trend is the concentration on artificial intelligence, with 74% of the deeptech startups founded in 2023 focusing on AI, a significant increase from 62% between 2014 and 2022.
Despite India’s status as a hub for global AI talent and the largest pool of developers, the country ranks sixth in the deeptech sector.
Challenges and Recommendations
Kritika Murugesan, head of Nasscom Deeptech, highlighted key areas requiring support for India to climb higher in the global rankings.
“For India to be in the top three deeptech startups ecosystem, key areas that need support are access to patient capital for deeptech startups to build and scale their products, strong R&D partnerships with academia for nextgen innovation, streamlining government procurement for startups to build India specific solutions and implementation of the deeptech policy that was tabled in 2023,” she said.
Funding Decline in 2023
The report also noted a significant dip in funding for Indian deeptech startups, with a 77% decrease compared to the previous year, totaling $850 million in investments.
“Both early and late-stage deals have witnessed a reduction of over 60 per cent this year. This downturn is attributed to smaller average investment sizes at both the seed and late stages and investors remaining cautious largely due to the extended gestation periods typical of these ventures. 31 M&A deals were reported in CY2023, a decline of about 45% as focus shifted to accelerate tech capabilities that provide the AI edge,” it stated.
Sector-Focused Solutions
Another trend identified in the report is the growing emphasis on sector-focused solutions within the deeptech ecosystem. Four sectors of strategic importance were highlighted: space and defense, healthcare, automotive, and industrial manufacturing.
Over 500 startups are developing solutions in areas such as electrification, industrial robotics, surveillance and drones, satellite imagery, propulsion systems, and cancer diagnostics.
Emerging Hubs
Emerging hubs saw notable growth in 2023, with over 110 deeptech startups being established, marking a twofold increase from 2022 and the highest growth rate in the past five years.
This growth is attributed to an expanding talent pool, cost advantages, supportive ecosystems, and proactive policies fostering innovation in these regions.
The Nasscom-Zinnov study underscores the dynamic nature of India’s deeptech sector and the potential for further growth with the right support and policies in place.
