After a series of exits, India-focused investors are ready to fund the next round of startups. This time the money will go to more hard tech areas.
Image credit: Getty Images
While IPO markets almost everywhere else remain sluggish, India’s boomed in 2024 with startups like the e-commerce service Swiggy and mortgage lender Bajaj Housing Finance making successful debuts.
An active IPO market set the scene for another boom in startup investment — but this one looks likely to be different from last time. While India already has a strong reputation for consumer and fintech startups, investors say the country is also carving out a strong position in deep tech sectors like energy, electric vehicles and robotics.
In part, this is because the last decade has seen a growing diversity in the sources of capital available, which has allowed a broader range of startups to flourish.
In other words, India’s venture capital ecosystem has “matured”, says Romit Mehta, vice president at Lightspeed India Partners, part of the VC firm Lightspeed Venture Partners. Lightspeed operates a $500m fund that invests across consumer, energy and tech sectors in India and Southeast Asia.
“Deep tech has become richer as it has progressed,” Mehta says. “One reason is that the capital pool has deepened.”
“There are different pools for a given kind of startup now. You have a better capital-business fit [today], and better guidance from investors on startups.”
And indeed, some of the latest wave of companies going public show that deep tech sectors like AI, electric vehicles and energy are on the rise, continuing a trend GCV reported on in 2023.
Ola Electric, India’s largest electric scooter company, went public in August 2024, raising $734m. IdeaForge, a drone company that supplies the Indian military and commercial customers, raised $69m in its June 2023 IPO.
Manufacturing consent
Ravi Jain, who leads TDK Ventures’s India operations, has seen the startup ecosystem develop over the course of his 20-year career as an entrepreneur and investor in India.
“Earlier, you would see very few deep tech-focused companies, because there were so many low hanging opportunities in e-commerce, fintech, etc.”
Ravi Jain, TDK Ventures
“The variety of technologies, especially in deep tech, is very refreshing to see,” he says. “Earlier, you would see very few deep tech-focused companies, because there were so many low hanging opportunities in e-commerce, fintech, etc., that people would not solve the difficult problems, and now they are doing more of that.”
Jain says the country’s focus on manufacturing has helped to make a focus on deep tech possible. In 2014, the Modi government launched its Make in India campaign, which aimed to draw more investment into the manufacturing base and increase the ease of doing business. While the programme has fallen short of its stated targets — and in fact manufacturing now forms a lower proportion of GDP than at any time since 1967, according to The Economist — Jain believes it is still partly to thank for making some startups more viable.
“All the robotics or industrial sensing opportunities are linked to activity in the manufacturing sector,” he says.
TDK Ventures invests with a high degree of independence from its corporate parent, the Japanese multinational electronics company TDK. The technology of its portfolio companies are not closely related to the scope of TDK’s current business, but instead try to look beyond into the future.
So far, the CVC unit’s India office has made three investments, each in different industries. These are: Exponent Energy, which makes electric vehicle batteries for logistics vehicles but also provides the charging station and connectors, specialising in 15-minute charges; Infinite Uptime, which provides a digital analytics system for plant managers to reduce downtime; and Fasal, which uses an AI-powered platform to help farmers improve their crop yield.
Jain thinks the buoyant exit market will encourage investment going forward.
“That’s a big lever, I would say, because, you know, that was not existent before at all, and there is a ripple effect, because funds across stages have the belief that, okay, the end goal might be public listing. So even the later stage funds are more willing to invest in [early-stage deep tech] companies.”
Nevertheless, the IPO market is so active right now that there are fears that valuations are too high and could be set to painfully contract. Recent indicators show that the underlying economy is slowing and that companies are not doing so well post-listing.
Jain cautions that the companies going public will have to deliver on their valuations to keep the momentum going.
“This experience is very new for entrepreneurs on how to kind of deal with the pressures of being publicly listed,” he says.
“The stakes are very high here.”
Future dominance? EVs, renewables and agtech
Indian startups working on complex technology are not yet the dominant draw for corporate investors. GCV’s CVC Funding Round Database shows that in 2024, all the largest corporate-backed funding rounds for Indian startups were for those in sectors like fintech, e-commerce and services. It is not yet clear which industries Indian tech could come to disrupt the most.
One that is very promising is smaller electric vehicles, which has received strong attention from investors. Besides Ola Electric’s IPO, there were also significant corporate-backed funding rounds in 2024. In June, Battery Smart raised $65m in its series B round, which Panasonic participated in. It provides lithium-ion batteries for two-wheeled and three-wheeled vehicles. Statiq, which runs an EV charging network, raised $50m in its series B raise in the same month, in a round led by Shell Ventures.
Jain says the development of India’s EV market to meet the population’s needs is making it grow in a unique way.
“The way the EV revolution is playing out in India is very different. It’s not as much in cars as it is in scooters and motorcycles and three wheelers and so on. So there are many unique things that need to be done in India, and the Indian startup ecosystem is actually doing exactly that,” he says.
Jain believes it is possible that Indian startups have an advantage in being better-suited to other developing countries in a way western-produced technologies are not.
“India is like a representative of the global south,” he says. “So much of the innovation that happens here can probably, with some adaptation, travel to other countries and market. So that another opportunity, a big opportunity, which is there.”
“TDK Ventures globally has a wide area of interest,” he adds. “This includes everything to do with electric mobility, innovation in agriculture, renewables and technology related to that.”
Lightspeed has also invested in Exponent Energy, TDK Ventures’s portfolio company that makes EV batteries and chargers. Mehta agrees that there is scope for international demand for this kind of India-produced technology.
“EV tech can also expand to Africa if it is done well. It is better suited to those markets than, say, Tesla,” he says.
But Mehta does not believe that the rise of tech and deep tech startups has come at the expense of the consumer sector. He thinks we can expect a lot more innovation in that area as well.
“I think you’ll see more consumer products come out of India,” he says. “TikTok is from China, so why should India not do that? It’s inevitable, I think.”
