New Delhi: Startups exploring space, crafting high-end chips and developing defence technologies may get long-term loans at low or nil interest rates from a ₹1 trillion government fund to support companies in promising segments struggling for capital.
Setting up the fund for deeptech companies, first proposed in the interim budget in February, is part of the government’s to-do list for the first 100 days in power. An inter-ministerial committee led by the Department of Space is working on a framework for the fund, in coordination with the central government’s principal scientific advisor, three officials familiar with the matter said, adding it will be announced in the next two months. The fund will be part of India’s National Deeptech Startup Policy.
The framework may identify sectors such as advanced semiconductors, high-tech manufacturing, space, defence technologies, specialized artificial intelligence applications and quantum computing as deeptechs eligible for state aid, said one of the three officials cited above, all of whom spoke on the condition of anonymity.
Apart from access to capital, the framework will also “focus on nurturing research, innovations and standards, and strengthen market access” for deep-tech ventures, one of the officials cited above said.
Key objective
Industry stakeholders said that while the finance minister’s 1 February announcement was reassuring, the policy framework will be key in explaining which startups would be eligible, and push to help startups develop niche technology-driven products in India.
Ajai Chowdhry, chairman of electronics industry body Epic Foundation, said that the key objective of the deeptech policy framework will be to boost R&D in the private sector which, in turn, will help make India a nation that builds and designs its own products, and not just offers services.
“One of India’s key challenges is that we only provide public R&D funds for government organizations. The present government’s thought is that to make India a ‘product nation’, we must do deep R&D. What we thus need is a framework to invest money from the public to the private sector, which can be startups, as well as medium and large companies. These sectors can create focused research organizations under this framework,” Chowdhry said.
“For too long, we haven’t invested enough in R&D in India. The percentage of R&D by private firms in India is too low. Such a model is already proven to be extremely successful in the US and Korea, and wildly successful in China. It is high time that India migrates from being a services nation, to products. We will never have sticky business in the country, otherwise,” Chowdhry said. The “stickiness of businesses”, Chowdhry said will help generate actual value, stressing on the need to create technology IPs.
Hope for funding
In January 2015, internet giant Google and investment major Fidelity jointly invested $1 billion in Elon Musk’s space services startup SpaceX in a single funding round, which has since become the largest privately owned rocket startup. However, India has seen no such investments, and private equity and venture capital funds have shied away from deep-tech startups. The government hopes giving loans with tenures up to 50 years could help the sector.
Many startups focusing on futuristic technologies find it difficult to attract investors given that their markets aren’t developed yet. One such example is BrainSight AI, a Bengaluru-based brain-computer interfacing startup seeking cures for schizophrenia and associated neurological disorders through AI.
Pari Natarajan, chief executive of consultancy firm Zinnov, said, “Access to funding continues to be the biggest challenge area for 70% of the Indian deeptech startups, with median ticket sizes being the smallest across almost all funding stages when compared to other leading deeptech startup ecosystems in the world. Other challenge areas include talent attraction and retention, and access to robust research and computing infrastructure, among others. So, while India has the third-largest pool of deeptech startups in the world, it needs a fillip through targeted support to catch up with its international counterparts.”
Ashok Chandak, president of semiconductors-focused industry body India Electronics and Semiconductor Association (IESA), said that fine definitions under the framework will be key. “We have offered recommendations to push the deeptech startup policy already. The key challenge is that the ₹1 trillion corpus was very broadly defined. What we need to look at is actual operationalization by clarifying how sectors like semiconductors and electronics will be boosted. There could be special exemptions in the form of incentives for exports, value-addition norms for high-tech manufacturing to focus on designing products in India, and boosting of R&D,” he said.