The more things change, the more they remain the same… while it may sound repetitive, the underlying principle holds immense value today. In a world where volatility is a constant, and plans are disrupted by geo-political and economic events, there are some things that are unlikely to change in the foreseeable future. Two of those matter to us, here and now: the opportunity represented by India and, more specifically, by DeepTech ventures that have been our focus since inception. Consider these economic and industry tailwinds:
- As India moves up the value chain from low-cost software services to manufacturing and DeepTech development, technology industry revenue (including hardware) is estimated to cross US$ 245 bn in FY23 and will double to US$ 500 bn by 2030.
- We are the world’s fourth most popular destination for startups with share of VC inflows expected to double by 2030. As a percentage of GDP, PE/VC investments in India (1.2%) in 2022 are expected to increase to 3-3.5% by 2027.
- AIF CAT II funds have been a fast-growing category over the years with AUM growing at a CAGR of 70% over the last seven years.
- Participation of conservative institutions such as PFRDA, IRDA, educational endowment funds in the PE/VC space.
Recognising this trend, the government has unleashed a slew of opportunity enablers. It published a draft National DeepTech Startup Policy 2023 which provides a comprehensive framework to address the challenges faced by Indian startups. The Digital India initiatives go deeper today with AI and NLP resources available to MSMEs. Buoyed by the success of the Chandrayaan-3 and Aditya-L1 missions, the Indian Space Policy 2023 document supports the creation of an independent nodal agency IN-SPACe. 26 Centres of Excellence (CoEs) in new and emerging technology areas are being set up by MeitY.
The opportunity is further validated by various micro level data points that include:
- A recent listing of DeepTech startups through IPOs as a viable exit mechanism.
- A 41-rank leap for India in seven years to no. 40 in the Global Innovation Index.
- India’s SaaS revenue witnessed 60% revenue growth rate between 2020-22 and will exceed US$ 50 bn by 2030.
- The share of emerging technology patents has risen from ~48% in 2010 to ~73% in 2022.
- Over 3,000 DeepTech startups have been registered at a 53% CAGR over the last 10 years.
Against this backdrop, we at YourNest are even more convinced of our investment thesis with several of our portfolio companies – WIOM, Miko, Dozee Exponent, Datamotive, Lavelle and CredRight – raising subsequent funding rounds. With some exits lined up in the next few months, and over 90% of the Fund III corpus already subscribed, we remain optimistic about delivering healthy returns to our investors.
Sunil K. Goyal
Managing Director & Fund Manager
October 23, 2023