As India moves up steadily towards a $5 trillion economy and aims at $1 trillion digital economy, critical sector focus on electronics, semiconductors, defence and aerospace by the government has been the key with periodic, enabling policies. Is this the only key which will unlock the doors to innovation, incubation of disruptive technologies and kickstart the startup ecosystem to an unprecedented scale? The answer lies in two important aspects with industry taking ownership of projects of nascent technologies with future national importance and energising investment in these segments.
Technology and money have a relationship which is co-evolutionary and reciprocal. Focused and timely funding can support innovative ideas which can steer technological advancements, besides disrupting traditional industries. Timely funding helps to create job opportunities which contribute to the overall economic growth. As technology intensive entities in this space grow, they challenge established players, fostering a competitive and dynamic market environment. Catalysing this domain will also attract top-tier talent, as prospective employees seek opportunities for growth and impact.
One argument says that since there is no big outcome from these sectors in quick time, venture capital firms and individuals are wary of investing due to an unknown outcome. The flip side is that most innovations of the eighties and nineties in the West catered for markets beyond their shores. Since India is a large market with much higher metrics of consumption, this argument needs to be reviewed and reassessed.
Entities in high technology space essentially look at building a prototype to seek early-stage validation through grants, identify venture capitalists, leverage government support and should ideally use government scheme to reduce the cost and time of patent filings. Some entrepreneurs and technologists have opined that since the ecosystem is well developed in certain countries, raising money for the startups in these niche segments in well-established ecosystems is much easier as compared to India. The argument also hinges on a greater technological understanding of venture capitalists and their willingness to deploy their funds appropriately.
In terms of an overall visualisation for a large cross section of startups in India which have raised funds, innovation has seemingly been prevalent only in the commercial models than in technology. While we make products and platforms for tech giants, very few companies have emerged from India in the past decade. The answer lies in the lack of the patient and domestic capital and risk taking which created these giants in the West.
The era of the so called “Garage Startups” is over and technology requires funding at its very inception. This is an important gap which needs to be addressed. While the government has diligently launched enabling schemes to catalyse this, industry needs to pitch in to ascertain viable projects in this space and fund them. Venture capital firms and investors funding these critical segments need to do more than just talk about innovation. The structuring of venture capital entities in these domains need to be perhaps, reconfigured with an entrepreneur or a technologist on the board, who has been a part of creating a company/product/IP in the past. This key asset is likely to know more about the timelines, technology, market, risks and pitfalls than someone who has worked in a technology behemoth earlier, wherein both infrastructure and demand were catered for, intrinsically.
Banking sector could also be made more agile with more impetus on commercial banking looking at a higher scale of venture debt provisions for early-stage ventures. Traditional funding, such as bank loans, have generally been more accessible to a broader range of businesses, particularly those with established track records and collateral. While major banking reforms happened in 1991, this journey could now focus to address emerging technology challenges to support the country’s ambitious economic growth aspirations.
The gap of technology and funding could be also bridged by various workshops conducted by both private and public sector to educate the venture capital entities on emerging and future technologies as well as incorporating them in joint reports and research for a far greater understanding of the requirements.
Technology is synonymous to competition. It is conversely important that all startups and SMEs in these niche domains weigh their risks, imbibe astute financial planning and adopt a customer centric approach with realistic demand gaps. It is further important that select high technology projects are valued and steered by the industry to ensure that there is a lesser loss of talent. Unrealistic growth expectations and short-term focus can seriously impede long term innovation metrics and needs to be factored seriously.
Technological cycles are very fast paced and generally non-repetitive. Human behaviour is cyclical which allocates capital, speculates and gets organised by a response mechanism. It is however a reality that that no big entity was built from scratch. It has always been a function of a need gap, creating the corresponding technology segment, diaspora, IP management and critical funding.
On a separate note, the pursuit of technology does not hinge on manufacture of foreign design and IP management. It is acutely aligned to creating sovereign design and IP which requires timely funding, despite extended timelines of gestation and application. It is, therefore, essential for any business in these high technology domains to first secure the capital, create demand in the market, accrue competitive pricing, scale up the resources and then eventually diversify to make a global impact.
Beyond the government grants, there needs to be a greater understanding of technology by the venture capitalist ecosystem and a change in mindset to not view these domains as high risk, undeveloped markets. There is a crucial need to focus on “Big Tech” rather than only on “Consumer Tech” which is relatively easier to grasp and can be established much faster.
- Anurag Awasthi is a veteran, and CEO of Escape Velocity Mediaworks. He is a known policy expert and a columnist who writes extensively on critical technologies, security and geopolitics. Views are personal.
