Deeptech Innovation Not Just Responsibility Of Startups: Sanjeev Bikhchandani

Days after commerce minister Piyush Goyal triggered a debate over, Info Edge founder Sanjeev Bikhchandani shared his take on the topic in a detailed post on X.

Highlighting a gap in venture capital interest and lack of motivation from founders to start a deeptech venture in India, Bikhchandani said that commercial success of such ventures is often questionable, leading to lower numbers of startups as well as fund infusion in the sector.

Besides, even if an investor backs startups innovating in fields previously unheard of, financial support to such entities can not be indefinite.

“… there is this gap between it being a national priority versus it making sense for an individual entrepreneur or an individual founding team and individual VC firms. This gap needs to be bridged. And I’m not sure that the current institutional structures will make for that bridging adequately,” he said.

The Capital Trouble

The dearth in capital in the sector is, without a doubt, one of the biggest issues that is inhibiting its growth. As per Inc42 data, deeptech startups raised about $2 Bn between 2014 and 2024. In comparison, Eternal (earlier Zomato), one of the biggest names in the Indian startup ecosystem and a portfolio company of Info Edge, has raised more than double this amount (about $4.6 Bn).

Giving the VC point of view on this, Bikhchandani said Info Edge has invested in 18 deeptech startups, including Matter Motors, Manastu Space, Unbox Robotics, via its VC funds and subsidiary Red Start. He said the company continues to invest in 1-2 deeptech startups every quarter.

However, he said that the nature of deeptech startup investment is complex. The time taken by deeptech startups from ideation to entering the market to profitability is an arduous process. Add on to this the fact that, in India, there is scant visibility for such entities for the first few years. And even after that, the market size for “such stuff” tends to be much smaller than in the US.

Amid this elongated process, Bikhchandani said that VC funds, which typically have a life cycle of 8-12 years, would be looking to make their exits in a timeframe that might be considered too short to fund a deeptech company.

The investment time frame is often cut short because of pressure to return the money invested in such funds by limited partners or general partners.

“And because of this constraint, deep tech companies that have a very long gestation period to grow and scale and listing or exit, find it hard to raise money,” he added.

He cited these structural challenges as the reason behind the dearth of capital in the sector. “So deep tech investing needs funds with a much, much longer time horizon for investing, perhaps perpetual capital. And that is the conundrum,” he added.

Another key challenge Bikhchandani noted is that the founders who are building deeptech companies might not be the “most commercially savvy”. While India produces great scientists and tech wizards, they might not be good at commercialising innovation. The veteran investor opined that bringing in people who are good at “commercial stuff” into early stage deeptech companies is a challenge worth solving.

Government, Industry Need To Step Up Their Game

Citing an example of OpenAI, which has raised about $58 Bn to date, Bikhchandani said that the initial backers of the company were not VC funds but deep-pocketed people like Elon Musk.

“Eventually Microsoft and a few other large companies in the US invested. So, yes, it was a startup. But it’s not as if AI has been built by VC funds,” he added.

It is pertinent to mention that the ChatGPT maker saw Sam Altman, Greg Brockman, Elon Musk, Reid Hoffman, Jessica Livingston, Peter Thiel, Amazon Web Services (AWS), Infosys, and YC Research pledge $1 Bn to it in 2015 (its inception year). Famously, Musk had received a $100K donation from Robert Zubrin when the concept of SpaceX was in the ideation stage.

Talking specifically about the development of LLMs, which the Indian government is pushing for, Bikchandani said most successful models have come from profitable consumer internet companies like Meta, Google and Amazon. These companies used their profits to invest in AI.

It is pertinent to mention that Zepto cofounder Aadit Palicha also made a similar point in the past, saying successful consumer internet companies are best positioned to lead technology-led innovation.

Meanwhile, Bikhchandani called for the government and industry also to step up considering the big investments needed by deeptech companies.

“There are only very few such large balance sheets, whether in the private sector or public sector, that can support this kind of investment in R&D. So, whether it is a Reliance, or a Tata, or a Birla, or Adani, in the private sector, maybe maybe the big IT companies such as TCS, Infosys, Wipro, HCL, and in the public sector, maybe an ONGC and NTPC, or perhaps in the government’s balance sheet itself,” Bikhchandani added.

He said that it can’t just be the responsibility of the startup world to lead deeptech innovations in the country.

To sum it up, the investor opined that deeptech investing needs funds with a long time horizon, perhaps perpetual capital, for companies which might not have a clear path to profitability and even earning revenue. This conundrum is something that the government’s deeptech fund of funds might also face.

For context, Goyal, a couple of days after triggering the deeptech debate, announced the government’s plans to allocate a for deeptech startups.

The minister noted that the allocation will mobilise “patient capital” for research-oriented startups to promote the development of cutting-edge technologies in emerging areas such as AI, quantum computing and robotics.

This patient capital is exactly what the Info Edge founder stressed up on. “Even if there’s going to be a focus on deep tech for allocation, we cannot be investing in funds that have a 10-year or 12-year time horizon. It will possibly have to be a 20-25 year time horizon fund or perhaps an infinite time horizon, open ended fund. And that is something to solve for,” he added.

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