2022 might be remembered as a turning point for deeptech businesses. Deeptech startups, which include those in space technology, electric vehicles, robots, artificial intelligence automation, and climate change, have increased by 100% YOY during the past three years.
The Russia-Ukraine situation has had a dramatic impact on oil prices in 2022, which has in part prompted India to adopt electric vehicles. Russian rocket launch infrastructure is lacking, which might mean more revenue for entrepreneurs in the Indian space industry like Agnikul.
The conflict between Russia and Ukraine has also changed the situation and made a “Atma Nirbhar” Bharat urgently necessary. As a result, the defence ministry and the armed forces have established numerous grant and assistance programmes, including IDEX grants, all of which encourage the creation of new deeptech firms.
The government’s establishment of IN-SPACe (Indian National Space Promotion and Authorization Center) has had a considerable impact on the space industry and allied businesses, and the foundation for drone policy is clear. The DGCA has started creating a framework for flying taxi policy. ISRO has made its facilities available to space entrepreneurs for private launch and testing.
Additionally, prohibitions on the use of satellites for data, GIS, and mapping in a range of applications were loosened by the government. There has been a change in the public’s perception of climate change, and all of these government events have made good policy comments. The fact that it is now being treated more seriously has an impact on how the entire deep tech sector will develop over the course of the next two to three years.
Focusing on Key Deeptech Sectors
The three main industries that we believe will benefit businesses are space, climate technology, and electric vehicles (EV).
Spacetech
The spacetech industry has performed remarkably well in 2022 in terms of funding and milestones attained. Startups like Skyroot and Pixel were given the opportunity to test their initial product releases.
Agnikul is additionally anticipated to do a test launch soon. Each of these businesses has not only hit important milestones, but many have also begun to draw larger capital pools than in the past.
Adoption of EV
The market is moving from the early adoption phase to the next stage in the adoption curve, and EV adoption peaked in 2022 (9,42,756 2W sold in the previous 12 months). In only five to six years, mass adoption will be a reality.
This has resulted in improvements in BLDC motors, material science, and battery management systems (BMS). Significant investments will be made in all facets of EVs during the next few years. Examples include Exponent Energy, Log8, Race Energy, and other well-known businesses.
The government of India’s standardisation of batteries for swapping will be an important milestone in 2023, increasing adoption, and battery charging infrastructure will also require considerable investment in the upcoming years.
Climate Technology
Similar to the early internet in the 1980s, climate technology is a horizontal play that will be embraced by all verticals. EVs, electric/solar drones, electric planes, water management, carbon capture devices, green hydrogen, industrial chemicals, agriculture, and alternative proteins will all fall under the category of climate technology. Long term, hopefully, this will have a beneficial effect on both our lives and the earth.
Additionally, investors’ roles change from merely acting as high-return money managers to also acting as sources of profitable, sustainable firms. We anticipate a paradigm shift in finance to occur over the following ten years, with 2020 serving as the beginning point.
Deeptech Trends That Are Predicted For 2023 IP Creation Will Be The Most Important Aspect
IP creation, which has worth beyond only current revenues and earnings, is a natural advantage for the majority of deeptech organisations. This results in the production of knowledge and intellectual property, which creates a positive cycle that will strengthen the country over the following decades.
The Deeptech Sector Will Be Driven By Unit Economics
Deeptech firms naturally produce intellectual property, and producing IP takes time. However, once a business has established itself and its product is validated as being viable, turning a profit often takes 2-3 years.
While we do not anticipate them to be profitable in 2023, we do think there is a high probability that some of the more established ones may achieve positive unit economics in that year.
On the global stage, Deeptech will be a long-term player.
Since deep tech is often not bound to any particular region, it has a global nature from the start. Deep technology is a long-term strategy that will continue given the importance of tackling climate change on a global scale.
Although funding for the industry may slow down temporarily, deep tech firms will prosper over the medium to long term since they are fundamentally innovating using atoms (hardware) rather than bits (software).
Money Will Be Stable, But M&As Are Too Soon
For deeptech startups at the pre-seed or seed stage, funding should be consistent. M&As are premature; the industry must evolve and create the Series B+ investment that represents the deep tech sector’s missing middle.
We require a few businesses to show that the sector can produce successful enterprises, and we require growth-stage investors to join the deeptech bandwagon. Some of the major investors in the nation also need to comprehend deep tech better. Perhaps it will take some time before some of these bigger VCs decide to participate in this game.
Deeptech unicorns are about to appear
Unicorns should appear in this market over the course of the following two years, during the following boom cycle. We don’t anticipate these organisations to make significant layoffs because the talent pool in the industry is small.
The deeptech market is big enough to support ten or more unicorns over the next five years. India will genuinely open up to the rest of the globe over the course of the next ten years, with top-tier businesses forming in this industry.
