3 Biggest challenges that India's Deep Tech startups are facing

India's Deep Tech sector is flourishing, with a record number of startups emerging in 2023. A report by NASSCOM and Zinnov reveals that 480 new Deep Tech ventures were established, nearly double the number in 2022, making India the world's third-largest Deep Tech hub.
However, this promising growth is threatened by a funding crunch. The report highlights a 77% decline in funding in 2023 compared to 2022, with the total raised dropping to $850 million.The number of funding deals also fell by 25%.
This funding gap is a major obstacle for Indian Deep Tech startups. The report identifies three key challenges: Securing funding for scaling operations; attracting and retaining talent, and achieving global expansion.

Artificial intelligence (AI) is reported to be the star of the show, attracting the most interest from both founders and investors. In 2023, 74% of new deep tech startups focused on AI, and 86% of funded startups had an AI focus. AI is also leading the way in patent filings, accounting for 41% of all deep tech patents.
Venture capitalists cite the long development timelines inherent to deep tech as a major barrier to investment. The report suggests that government initiatives, such as co-investment programs and support for patient capital, are crucial to attracting more investors.
The investor pool has shrunk significantly, with a 60% drop in participation compared to 2022. The absence of large global investors is a key factor. Investors are currently favoring smaller, seed-stage deep tech ventures with lower risk profiles, further limiting overall funding.
NASSCOM recommends a multi-pronged approach to address these challenges. The report calls for government action to strengthen innovation clusters, provide access to patient capital and computing infrastructure, expedite the National Deep Tech Startup Policy, improve intellectual property frameworks, and develop a robust talent pipeline.
Despite the funding hurdles, India's Deep Tech sector is said to hold immense potential. With continued support, these innovative startups can overcome these challenges and become global leaders.