T.N.Hari:Venture capital is yet to bet big money on high-risk deep-tech startups

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Subscribe to enjoy similar stories. Venture capital (VC), by definition, has a higher risk appetite than conventional sources of capital, and many VC enthusiasts would argue that venture investing is a moonshot game.

The universal VC playbook for mitigating risk is based on an ‘investment thesis’ at the intersection of external opportunity and internal core competence, and real ‘deep tech’ businesses are not a part of the investment thesis of most Indian VCs. This is as much a reflection of the infancy of the ‘deep tech’ ecosystem in India as it is of the high uncertainty and long gestation involved in finding the appropriate product-market fit for a deep-tech idea.

To understand why VCs in India have yet to enthusiastically embrace deep tech, it is helpful to understand the history of VC investing in India. India’s tryst with new-age technology began in a small way, when, for the first time, first-generation entrepreneurs with no family background of business grabbed opportunities that showed up through a chance confluence of events and past decisions to create a global technology services industry on an unprecedented scale.

While the nature of work was nothing to write home about, it slowly but surely created a large talent pool of engineers that would provide the capability to steadily move up the value chain. While VC did play a role in creating what would prove to be India’s identity on the world stage as a startup hothouse, it was limited, largely because the global tech services business model was profitable from day one and could be scaled through internal accruals.