Deep Tech Startups: Pioneering India's Technological Future : Daily News Analysis

Date : 04/08/2023

Relevance:

  • GS 2: Government Policies and Intervention

  • GS 3: Economy

Keywords: Startup India movement, entrepreneurial ecosystem, public sector labs, scientific discoveries, Startup India 2.0, indigenous technologies, national security.

Context-

  • The past decade has witnessed a remarkable boom in Indian startups, fueled by young entrepreneurs and supported by the government's Startup India movement. This entrepreneurial surge is not confined to metropolitan cities alone; it has spread its wings to suburban and rural areas, igniting a sense of empowerment among the country's youth. Presently, India boasts over one lakh recognized startups, with nearly half of them originating from Tier 2 and Tier 3 cities.
  • This burgeoning startup culture is not limited to consumer internet and e-commerce but has expanded into the realm of deep technology, revolutionizing sectors like space and remote sensing, artificial intelligence, robotics, biotech, pharma, electric vehicles, drones, defense, telecommunications, and semiconductors. These deep tech ventures hold the promise of not only transforming digital marketplaces but also driving industrialization in newer domains and generating numerous job opportunities.

Unlocking Potential in Public Sector Labs:

Deep tech entrepreneurship is serving as a conduit for converting scientific discoveries from public sector labs into market-ready solutions. Exemplary success stories include IIT Madras's Research Park, nurturing over 200 deep tech companies valued at over ₹50,000 crores, C-CAMP supporting seven deep biotech startups that have raised more than ₹550 crores, and the National Chemical Laboratory's Venture Centre facilitating the commercialization of high-quality patents. Faculty members now find it more expedient to spin out their research through startups founded by themselves or their alumni, rather than pursuing traditional avenues like licensing or patent re-assignments. This shift presents an unprecedented opportunity to leverage India's substantial investments in science and technology research within its public institutions.

Deep Tech Startups: Spearheading Technological Risks:

Deep tech startups have emerged as the vanguards of India's technological risks, an essential aspect of building new capabilities in any country. While government departments and legacy corporations often remain risk-averse due to scrutiny from stakeholders, voters, and public markets, startups embrace risk-taking as an integral part of their growth journey. The willingness to take risks, combined with a shared approach to measuring risk and progress during funding negotiations, has propelled the startup ecosystem's growth. This newfound model for scaling innovation must be amplified manifold by the government and industry to foster enterprises aligned with India's vast scale.

Initiatives taken to promote deep start-ups

  • Tamil Nadu Technology Hub (iTNT Hub)- It is a public private partnership located in Chennai to serve as a central hub connecting start-ups in emerging and deeptech areas.
  • TIDE 2.0 Scheme- It promotes tech entrepreneurship in India by providing financial and technical support to incubators that support ICT startups using emerging technologies.
  • Next Generation Incubation Scheme - It is an initiative of Ministry of Electronics and Information Technology that supports innovative startups in India.
  • National Supercomputing Mission - It is a government-funded initiative launched in 2015 to make India a global leader in supercomputing.
  • National Quantum Mission- It was launched in 2023 to provide state-of-the-art quantum research facilities to scientists and researchers across the country.
  • National Education Policy - It was launched in 2020 to emphasise multidisciplinary education.It calls for the creation of a new curriculum that will allow students to study a variety of subjects, such as science, technology, engineering, mathematics, humanities, and arts.
  • NECTAR- It is an autonomous society under Department of Science and Technology. It aims to harness and leverage niche frontier technologies available with central scientific departments and institutions to address the socio-economic challenges of the Northeast region.
  • Funds of Funds Scheme- The Government has established it with corpus of Rs. 10,000 crore, to meet the funding needs of start-ups.

Propelling Startup India 2.0:

To consolidate the gains of the startup movement, it is opportune for the government to launch "Startup India 2.0" with a focus on deep tech ventures. This second phase must entail two key components:

  • Enhanced Risk Capital: The government must allocate more resources to support deep tech startups in sectors such as space, defense, biotech, and others through the existing SIDBI Fund of Funds. Concurrently, industry players should redirect their research funds to finance deep tech startups.
  • Mass Procurement of Indigenous Technologies: A concerted effort is required to promote the procurement of locally developed technologies across various government ministries, including defense, smart cities, and health. Industry bodies can play a pivotal role in aggregating demand within their sectors, fostering the co-creation of products and solutions at incubators, facilitating rapid testing and certification, and supporting the procurement of innovative goods at scale.

India's Startup Ecosystem:

India's startup ecosystem has witnessed exponential growth in recent years, propelling the nation to become the world's third-largest startup hub, trailing only behind the US and China.Furthermore, India boasts an impressive tally of 105 unicorns, marking its significance in the global business landscape.

The Unicorn Phenomenon:

India's prowess in the startup realm extends to the formation of unicorns—privately held companies valued at over USD 1 billion. Remarkably, there are currently 105 unicorns, with a noteworthy surge of 44 born in 2021 and 19 in 2022. The areas of fintech, Edtech, B2B, and more are witnessing the emergence of these game-changing entities, reflecting India's exceptional potential for disruptive innovation.

India's Global Innovation Standing:

India's progress in innovation has been commendable, reflected in its rise in global rankings. From being ranked 81st in 2015, India climbed to an impressive 46th position in the Global Innovation Index (GII) among 130 economies in 2021. Notably, India ranks second among 34 lower-middle-income economies and first among 10 Central and Southern Asian economies in terms of innovation.

Growth Drivers Empowering Startups:

  • Government Support: India's Gross Expenditure on R&D (GERD) has seen a threefold increase in recent years, fostering an environment conducive to innovation. Additionally, women's participation in extramural R&D has doubled, signaling a more inclusive landscape.
  • Digital Transformation: The COVID-19 pandemic accelerated the adoption of digital services, resulting in an increased user base for startups operating in tech-focused sectors. The work-from-home culture and the growth of digital payments have been instrumental in facilitating this shift.
  • Buyouts and Acquisitions: Major public corporations are increasingly acquiring startups, fueling their transformation into unicorns. This trend reflects a strategic preference for external growth through acquisitions over internal expansion.

Challenges on the Path to Success:

  • Sustainable Investments: Although investments in startups have surged significantly, high capital infusion does not necessarily guarantee long-term success. Startups must focus on revenue generation and profitability to ensure sustainable growth.
  • Space Sector Potential: India's space sector holds immense untapped potential; however, the lack of a transparent legal framework has hindered independent private participation in this domain.
  • Domestic Investors' Risk Aversion: India's startup ecosystem relies heavily on foreign investors, indicating a lack of a mature venture capital industry domestically.

Government Initiatives Fuelling Startup Growth:

  • Startup India (2016), was launched with the aim of encouraging innovators, entrepreneurs, and thinkers in India to play a leading role in driving the country's sustainable growth and generating significant employment opportunities. The dedicated entrepreneurial portal witnessed an overwhelming response, with over 65,000 startups registering. Among these startups, 40 have recently achieved the coveted "unicorn" status, taking the total count of unicorns in India to an impressive 105 as of the current date.
  • NIDHI: The National Initiative for Developing and Harnessing Innovations (NIDHI) aims to foster innovation and entrepreneurship through various programs and initiatives.
  • National Startup Awards: The awards recognize outstanding startups and ecosystem enablers contributing to economic dynamism through innovation.
  • Prarambh Summit: The Prarambh Summit provides a global platform for startups and young innovators to showcase their ideas and inventions.

Conclusion:

Deep tech startups are at the forefront of India's technological revolution, venturing into uncharted territories and driving innovation in critical sectors. The government's support, coupled with industry collaboration, will be pivotal in unleashing the full potential of this entrepreneurial surge. Startup India 2.0 should be an ambitious endeavor aimed at nurturing Indian industrial and public capabilities, catalyzing economic growth, job creation, and bolstering national security and capabilities. With the right vision and collective efforts, deep tech startups will continue to redefine India's technological landscape, leading the nation toward a brighter future.

Probable questions for UPSC main exam-

  1. How has the shared approach to measuring risk and progress during funding negotiations contributed to the growth of India's deep tech startup ecosystem? (10 Marks, 150 Words)
  2. To bolster deep tech startups in India, what are the two key components proposed under "Startup India 2.0," and how do they aim to support the growth of these ventures? (15 marks, 250 words)

Source - The Hindu