India's National Deep Tech Startup Policy: A Journey towards Innovation

Introduction

India\'s deep tech startup ecosystem has been on the brink of a transformative shift. Prof. Ajay Kumar Sood, the Chairperson of the Prime Minister\'s Science, Technology and Innovation Advisory Council (PM-STIAC) and Principal Scientific Advisor, announced the imminent presentation of a comprehensive \'deep tech\' policy to the Union Cabinet. This policy followed the unveiling of a draft on 31st July 2023, now reportedly in its final version. India proudly boasts the world\'s third-largest startup ecosystem, housing over 3000 deep tech enterprises dedicated to pioneering advancements in artificial intelligence, machine learning, big data analytics, Internet of Things (IoT), blockchain, and more. These startups, venturing into diverse realms like agriculture, life sciences, chemistry, aerospace, and green energy, are on a mission to revolutionize industries through cutting-edge technological solutions.

Defining 'Deep Tech' and 'Non-Deep Tech'

The term \'deep tech\' continues to resonate as a buzzword in tech and startup circles, lacking a precise definition. The upcoming policy aims to provide clarity and strategic direction in this realm. Drawing from Startup India\'s database, the draft policy notes that, as of May 2023, 10,298 startups are recognized by the Department for Promotion of Industry and Internal Trade, classified within various sub-sectors of the expansive deep tech space shown in Table 1.

Table 1: Sub-Sectors of Deep Tech Space

Source: https://psa.gov.in/CMS/web/sites/default/files/process/NDTSP.pdf

What is a deep tech start up?

• A deep tech startup is characterized by its early-stage utilization of scientific or engineering advancements, paving the way for technologies not yet applied commercially. Such startups embark on unexplored pathways within scientific or engineering disciplines, often integrating knowledge from diverse fields. The distinctive feature of deep tech startups lies in their creation and ownership of Intellectual Property (IP), setting them apart from non-deep tech counterparts. The inherent technical or scientific uncertainty associated with deep tech startups presents both significant opportunities and risks based on their success. Notably, these startups are marked by extended development timelines and necessitate substantial capital investment due to the intricacies of their innovation processes.
• The depth exhibited by deep tech startups is contingent on the maturity of scientific and technological pursuits within a given context.
• In environments characterized by substantial investments in Research and Development (R&D) and advanced academic and industry research, deep tech startups that draw from more fundamental research tend to emerge. These startups often have broader applications and extended gestation periods, and necessitate sustained investments, rendering them more feasible and viable.
• Conversely, in contexts where R&D investments are limited and academic and industry research progresses incrementally, the nature of deep tech startups tends to be shallower.
• The identified attributes for recognizing deep tech startups can be elaborated, with parameters varying depending on the specific technology focus. For instance, suggestive parameters for distinguishing between Hardware and Service deep tech startups are provided in Table 2.

Table 2: Parameters for distinguishing between Hardware and Service deep tech startups

Source: https://psa.gov.in/CMS/web/sites/default/files/process/NDTSP.pdf

What is a non-deep tech start up?

In contrast, a non-deep tech startup typically relies heavily on the business model as its differentiating factor or moat. It thrives on easily producible or replicable technologies without significant advancements.

Objectives of the National Deep Tech Startup Policy

Objectives

• Strengthen the research and innovation ecosystem for scientific breakthroughs and technological advancements.
• Bolster the Indian intellectual property regime to attract international deep tech startups.
• Facilitate access to diverse capital sources through specialized funding programs and increased investments.
• Foster industry-relevant, cutting-edge research in academia.
• Enable infrastructure and resource sharing for accelerated product development.
• Support hardware-based deep tech startups with shared facilities for prototyping and validation.
• Create a conducive regulatory environment with streamlined frameworks and incentives.
• Attract and retain top talent with a focus on equity, diversity, and inclusion.
• Promote indigenous deep technologies through favorable procurement rules and global market access.
• Align with existing national policies to strengthen India\'s position in the global deep tech value chain.
• Address local, societal, and business challenges, focusing on key sectors aligned with national interests.
• Support the sustenance of deep tech startups, addressing funding limitations and resource constraints during the Valley of Death (VoD) phase.

Essential Foundations and Outlook

Released by the National Deep Tech Startup Policy (NDTSP) Consortium on July 31, 2023, the draft policy was open for public consultation until September 15, 2023. Framed after thorough consultations with stakeholders, the policy centers around four key pillars as shown in Figure 1:

Figure 1: Key Pillars

• Securing India\'s economic future
• Advancing towards a knowledge-driven economy
• Enhancing national capability and sovereignty through the Atmanirbhar Bharat imperative
• Promoting ethical innovation

Crucial Components of National Deep Tech Startup Policy (NDTSP)

1. Funding and Innovation: NDTSP envisions providing financial support through grants, loans, and venture capital, streamlining regulatory processes, and fostering collaboration between academia and industry. Proposed measures encompass a centralized platform, fiscal incentives, specialized financial instruments, and technology impact bonds.
2. Talent Development: Acknowledging the critical role of human resources, NDTSP advocates for STEM education promotion, training opportunities, and attracting international talent to nurture a skilled workforce in the deep tech sector.
3. Access to Advanced Infrastructure and Technology: Highlighting the significance of advanced infrastructure access, the policy suggests establishing deep tech incubation centres and testing facilities nationwide. It aims to fortify partnerships with institutions like IITs and IISc, providing shared infrastructure resources at nominal fees.
4. Public Procurement and Market Opportunities: NDTSP encourages government agencies to embrace deep tech solutions, unlocking fresh markets for startups. It also champions international cooperation and expanded market access.
5. Intellectual Property (IP) Protection: Recognizing the imperative of IP protection, the policy proposes a uniform IP framework, robust cybersecurity measures, and startup support through in-house capabilities and government-purpose rights for strategic technologies.

Current Landscape and Concerns

The proportion of startups in India falling under the \"deep tech\" umbrella remains significantly low, signaling the need for more concerted efforts and support mechanisms to nurture and bolster deep tech startups. The following points highlight an overview of India\'s dynamic deep tech landscape:

• Robust Presence: India\'s deep tech ecosystem boasts a strong presence with over 10,298 DPIIT-recognized startups, indicating a thriving landscape.
• Substantial Influence: Deep tech startups form a significant portion of India\'s overall startup ecosystem, showcasing their notable influence and contribution.
• B2B Focus: A majority of these startups operate on a business-to-business (B2B) model, emphasizing their dedication to serving enterprise clients and addressing specific industry needs.
• Growth Trajectory: In the past decade, Indian deep tech startups have experienced remarkable growth, attracting substantial funding and witnessing a surge in mergers and acquisitions.
• Dynamic Expansion: The continuous addition of new ventures has enriched the deep tech startup landscape, fostering a dynamic and entrepreneurial culture within the realm of advanced scientific development.

Global Strategies for Deep Tech Ecosystems

Several leading economies worldwide have adopted strategic measures to capitalize on the advantages offered by deep tech innovations and science-driven startups. These initiatives aim to enhance socio-economic competitiveness through infrastructure reinforcement, investment attraction, and the cultivation of skills and talent. The following Table 3 outlines key approaches undertaken by major economies in this endeavor:

Table 3: Global Strategies for Deep Tech Ecosystems

Government\'s Focus on Technology Transfer

The Department of Scientific and Industrial Research (DSIR), affiliated with the Council of Scientific and Industrial Research (CSIR), is gearing up to play a pivotal role in the evolution of India\'s tech landscape. Commemorating the 40th anniversary of its founding, the DSIR is focusing on technology transfer. While the DSIR will target medium and small-scale industries, the CSIR will extend its efforts to industry at large. The National Research and Development Corporation, another CSIR entity, will specifically concentrate on fostering startups. This multi-pronged approach aims to synergize scientific and technological developments with industrial needs, ensuring a holistic impact on India\'s science and technology ecosystem. Here are potential scenarios that could arise from the integration of these initiatives, contributing to the enhancement of India\'s deep tech startup ecosystem as shown in Table 4:

Table 4: Policies/Initiatives taken to enhance India\'s Deep Tech Startup Ecosystem

Overcoming Funding Challenges

One of the primary hurdles facing the augmentation of \'deep tech\' startups is funding. VK Saraswat, Member (Science) at NITI Aayog, highlighted the stark contrast in funding needs compared to fintech or retail software startups. The quantum of funds required for \'deep tech\' endeavors is considerably larger, posing a challenge that needs innovative solutions.

Addressing the intricate funding challenges prevalent in India\'s deep tech startup ecosystem, the National Deep Tech Startup Policy (NDTSP) aims to build upon existing initiatives, mitigating issues such as fragmented funds, misalignment between gestation periods and market expectations, and payment delays causing working capital constraints.

Conclusion and Looking Ahead

As India positions itself on the cusp of a new era in technological innovation, the impending \'deep tech\' policy holds the promise of reshaping the startup landscape. The focus on technology transfer and concerted efforts to support startups, particularly in the \'deep tech\' domain, are integral steps towards a more robust and diversified startup ecosystem. The success of these initiatives will not only be measured in numbers but in the transformative impact on India\'s scientific, economic, and technological fabric. The NDTSP aspires to democratize the benefits of deep technology, making them accessible across all levels of society and steering India into a new era of innovation, economic growth and societal development.