Funding to deep tech startups doubles in 2021


CHENNAI: Despite a year marked by a financing frenzy for consumer tech companies, deep tech startups were able to hold their own and attract more than double the investment as in the previous year in 2021.
Venture Capital (VC) Financing in Deep Tech Companies - Companies working on deep science and technology solutions totaled 133 investments valued at over 1.4 billion in 2021 (through December 15) US dollars, up from 106 deals valued at $ 556 million in 2020 and 107 deals valued at $ 567 million in 2019, according to data from Venture Intelligence.
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The average transaction size in the segment rose from $ 5 million in 2020 to around $ 11 million in 2021, data shows. That said, deep tech investments only made up about 4.5% of the total funding pie in 2021, and have hovered around the 4% mark since 2018. Investors and industry watchers say it's early days for deep tech investing to become mainstream in India in 2021 has seen a sharp surge in deals and investor interest with the push of the pandemic on digitization. While it didn't like the FOMO style of ecommerce, fintech, or edtech investing, deep tech entrepreneurs managed to get investor attention this year, they said.
"Deep Tech as a sector is gaining traction around the world, and although it has so far been marginal in India, we are currently seeing increased interest from non-traditional investors who want the space to generate potentially non-linear benefits for their traditional technology-led businesses." said Pratip Mazumdar, partner at Inflexor Ventures.
The heavily technology-oriented VC company is seeing strong interest from large family offices with a variety of business backgrounds such as pharmaceuticals, retail, automotive, etc.
Speciale Invest, another VC company focused on investing in deep tech and engineering innovations, sees the year as an optimistic start to the future. Vishesh Rajaram, co-founder of Speciale, said they regularly introduce their portfolio companies to other investors and that response rates on such connections have nearly tripled this year. Deep tech ventures need patient capital, and large companies are a good sign for the segment, he added.
Manish Singhal, founder of early stage deep tech fund pi Ventures, says such innovations don't require the millions needed by consumer tech companies, but nonetheless they saw tremendous international investor interest in 2021.
"Many of our portfolio companies started follow-up rounds this year and we also closed more deals than before," he said.
In segments like agriculture, agritech startups helped keep the entire agricultural supply chain afloat during the pandemic. Mark Kahn, managing partner of Omnivore, said in fiscal 2020-21 that the need to improve farms drove investment into farm management software, IoT, and other categories that had an 8-fold increase in funding and one Recorded 2-fold growth in transaction volume. Omnivore was involved in three agro-deeptech deals in 2020 and 8 deals in 2021.
However, he added that almost all current venture investments in Agritech are focused on digital technologies and innovations in the life sciences of the agri-food sector.

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