Indian Deep Tech Start-Ups Count Surges in 2023 but Funding Plummets 77%: Nasscom

Artificial Intelligence (AI) emerged as a founder’s favourite, with 74 per cent of deep tech start-ups established in 2023 driven by AI. AI was also an investor favourite, with 86 per cent of the start-ups who raised funding in 2023 having an AI focus.AI takes the center stage in patent filings with 41 per cent of all patent filings in deep tech, followed, with a large gap, by IoT and Neurotech, the report said.According to venture capital firms, long gestation periods are the biggest challenge facing them while investing in deep tech. “Co-investment programmes and government-backed instruments are necessary initiatives to be taken by the government to make the landscape more favourable to invest in,” the report said.The number of investors participating in funding rounds for India’s deep tech start-ups dropped by over 60 per cent in 2023 compared to 2022. The absence of many large global investors, who had previously driven funding, also contributed significantly to this decline.”Median ticket size across seed-stage and late-stage reached their 4-year low and 5-year low respectively. Although early-stage median ticket size reached a 5-year high, it was not enough to offset the overall decline in funding. The absence of mega deals in 2023 as compared to 9 mega deals in 2022, underscores a declining investor emphasis on large-ticket investments,” the report noted.Investors preferred investing in seed-stage deep tech start-ups with low ticket sizes and relatively lower risk, further declining the funding volume.Nasscom recommended the government to “identify and strengthen innovation clusters, facilitate the availability of patient capital and robust compute infrastructure, fast-track the implementation of the National Deep Tech Startup Policy (NDTSP), improve the IP framework, and strengthen the overall supplier ecosystem (including talent pipeline)”.A deep tech start-up involves early-stage technologies based on scientific or engineering advancements, to create and own Intellectual Property (IP).These start-ups are characterised by extended development timelines and high capital intensity and also carry large technical uncertainty which presents a large opportunity or risk depending upon whether or not it succeeds. Some deeptech startups in India are Clairco, Ishitva, GetVu, UptimeAI, HealthPlix, Cloudphysician, and Veative Labs.

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