‘India should be among the first nations to industrialise without carbonising the world’—Amitabh Kant, India’s G-20 Sherpa, former CEO of NITI Aayog and former IAS officer.
A similar playbook is being developed for Indian deep tech startups as well. We have observed that Indian-origin scientists and engineers are returning from abroad to build startups in India in the form of reverse brain drain. India stands to gain from this large pool of science-driven and research-oriented talent. For example, Rochan and Prasanta of Newtrace, a green hydrogen portfolio company of Speciale’s, returned to build their company in India. Both have advanced doctorate degrees from Europe and had lucrative options to pursue their skills and passions, but they chose to come back to India. They met at Entrepreneur First and pivoted at least twice before pursuing an opportunity they are both passionate about, based on deep scientific research.
IIT Madras and IIT Bombay are examples of universities that have devised sabbatical programmes to enable professors to build technology startups. All major IITs have incubation centres with deep-tech-focused programmes, and the Indian Institute of Science (IISc) hosts a panel of deep-tech experts to advise on startup incubation and those founders looking to commercialise their product beyond the lab stage. At Speciale, we are in touch with many professors who simultaneously build their own deep tech startups along with generating academic research, or are actively involved with mentoring a start-up.
The Indian government has been instrumental in supporting researchers to commercialise scientific innovations. Many successful lab-to-market innovations in the West have been possible only due to non-dilutive grants and low-cost debt provided by the governments in those countries. While India still has a long way to go in securing and amplifying the quantum of funding available to deep tech startups, the government support over the last few years has been very encouraging—through grant funding agencies such as BIRAC and FLCTD, as well as incubators such as C-CAMP Bangalore and Venture Centre.
The Indian government has been instrumental in supporting researchers to commercialise scientific innovations. Many successful lab-to-market innovations in the West have been possible only due to non-dilutive grants and low-cost debt provided by the governments in those countries.
India has a nascent venture capital (VC) ecosystem and is yet to witness more than one complete exit cycle. However, the last few years have been promising, with the volume of exits recorded and many VC funds making significant gains for their limited partner investors. Such returns have further emboldened VCs to take more risks and look beyond their comfort zone, namely the thematic areas of software, consumer, and internet startups. This has resulted in a larger number of mainstream investors making early bets into deep tech, capex-heavy and climate-positive companies, such as battery recycling, green hydrogen and cell manufacturing.
Large corporations can be key in sponsoring earlier R&D efforts of startups, partnering with these early-stage companies on commercial demos, being first customers, providing capital through their corporate venture capital arms, and being successful exit options for founders through acquisitions. For example, Indian public energy utility companies have partnered with our portfolio company, New Trace, to demonstrate their first electrolyser prototypes commercially. The corporate venture arms of global multinational companies such as Shell have invested in Indian startups like Off Grid Energy Labs (developers of the zing gel battery as an alternative chemistry to lithium-ion for mobility and stationary energy storage). While we are yet to see a large exit for an Indian deep tech startup, we have examples of Indian corporates acquiring deep tech startups, such as Reliance acquiring UK-based sodium-ion battery company, Faradion.
To foster deep-science innovations that can mitigate the effects of climate change, building an ecosystem of various stakeholders is essential. These innovations can never be built or commercialised in isolation but only with the active participation of various actors in the value chain. It is crucial to have the proper facilities to a) spark research and innovations; b) raise capital and hire resources to facilitate lab-to-market transitions; c) benefit from market conditions to scale up wide-scale adoption; and d) develop the right regulatory environment to facilitate all these steps.
To foster deep-science innovations that can mitigate the effects of climate change, building an ecosystem of various stakeholders is essential.
Based on our learnings, below is the trajectory of deep tech startups that benefit from a vibrant and supportive ecosystem:
As demonstrated above, we have charted three stages for the scale-up of deep tech companies, with examples from our portfolio building in each of these stages:
Our portfolio company, the ePlane Company, is India’s answer to electric air mobility solutions (its Western counterparts include companies such as Joby and Lilium). ePlane Company is an electric vertical takeoff and landing (eVTOL) plane company that allows aerial movement of people and cargo. They are developing the most compact eVTOL in its category, allowing the plane to conduct short intra-city hops at a cost-effective rate. At emission levels of 50 gm of CO2e per person per km annually, an ePlane could save emissions equivalent to 30 taxis.
The ePlane company was founded by Dr. Satya Chakravarthy, a professor of aerospace engineering at IIT Madras (IIT-M). Incubated at IIT-M, ePlane was provided with infrastructure for the establishment of the initial technology as well as product development research facilities. Speciale Invest, along with other investors, invested the seed and early capital required for commercialisation. They are the only eVTOL plane approved by India’s regulatory body for Civil Aviation, the Directorate General of Civil Aviation (DGCA).
The New Trace team designed a green hydrogen electrolyser from scratch, which uses no rare earth metals and no membranes; has cost-effective power conditioning and water filtration equipment; and has 70 percent fewer components than traditional electrolysers. New Trace was a basic lab setup in one of the IITM labs.
They raised early capital from Speciale Invest and follow-on funding from Peak XV (earlier Sequoia India). The Department of Science and Technology, as part of the Government of India, also offered low-cost debt. Furthermore, New Trace initiated paid partnerships with Indian corporations and public-sector companies to demonstrate the commercial viability of their technology. New Trace is set for exponential scale-up by lowering capex and achieving a production cost for green hydrogen at US$ 1-1.5/kg in less than five years. With the proper set of Green Hydrogen policies and regulations, this growth would enable them to become a globally competitive green hydrogen company from India.
Moreover, our portfolio companies, such as e-TRNL Energy (novel Li-ion battery architecture) and Metastable Materials (novel battery recycling), are similar examples of startups at this stage.
Ultraviolette, an electric superbike company, began as an idea to develop a cutting-edge electric two-wheeler technology company from India. Their F77 model received over 70,000 pre-launch booking interest from over 100 countries and they have brought best practices from aerospace, aviation, and consumer electronics to create India’s most advanced electric motorcycles. The company was started by Narayan Subramaniam and Niraj Rajmohan, a designer-engineer duo. It was a model ahead of its time before the EV revolution kickstarted in India. The company has raised US$ 55 million in funding since Speciale’s investment from corporate and private equity (PE) investors, including TVS Motor Company, EXOR Capital (investor in Ferrari), Qualcomm Ventures, and Zoho Corporation.
Various stakeholders must unite and build the ecosystem to facilitate the transition towards an energy-secure and climate-resilient India. Promoting deep tech innovations can play a major role in facilitating this transition while catapulting India into a global industrial powerhouse.
As technology readiness improves, deep tech startups need non-dilutive grants during their initial stages to address the science risk, a mix of equity and grants as the prototypes are built, and a mix of equity and debt when scaling up. For example, the early stages of research for lithium-ion batteries used in our mobile phones and electric vehicles were completely funded by governments through grants. However, today, most companies that are making lithium-ion technology innovations are funded through equity and debt capital. More proven technologies are less risky and opt for debt capital as it is cheaper than equity.
The above examples showcase trends pointing towards a radical evolution in shaping the Indian story around climate transition and energy security. Indian deep tech is a fast-growing opportunity, and climate is likely to be the largest opportunity within this theme.
Technology disruption is happening at a swift pace, not just in software but also in hardware innovation, which is transforming the pace at which the commercialisation of science and technology is taking place. We at Speciale are committed to supporting India’s low-carbon industrialisation by building a venture ecosystem to support the most cutting-edge deep science and engineering companies built in India, for the world.
Vishnu Rajeev is an Investment Principal at Speciale Invest.
Founded in 2017 by co-founders Vishesh Rajaram and Arjun Rao, Speciale Invest is a seed-stage venture capital firm that invests in founders building technologies of tomorrow. The firm backs ingenious entrepreneurs who use disruptive technologies to find innovative solutions that make an impact. The fund’s investment areas range from deep science and technology sectors, especially Industrial Hardware Products (emerging from deep tech in Propulsion tech, Robotics, Rocket engines, Lithium tech, Micro-electronics, Green hydrogen, etc.) to Enterprise Software Products (emerging from deep tech in Cloud, Voice & Vision ML/AI, Image Analytics, AR/VR).
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