New Delhi: Indian deep-tech startups in space and artificial intelligence (AI), many of which have struggled to secure funding, are set to attract “hundreds of millions” in investment over the next 12 months, as demand for sovereign technologies in critical sectors continues to rise, a top venture capital investor told Mint.
Sriram Viswanathan, founding managing partner at US-based investment firm Celesta Capital, said India’s startup ecosystem remains considerably behind Silicon Valley in maturity, even as opportunities in the sector rise.
“Sectors such as space, defence or next-generation artificial intelligence chips are crucial in national security, and Indian startups have a big opportunity to cater to large government demand than global markets. To do this, they’ll need several hundreds of millions of dollars and firm procurement contracts, before they grow at scale. While such funds and commitments have not been seen much, I can easily identify 10 startups that will get access to such levels of funds and orders over the next 12 to 18 months,” he said.
Sovereign investment avenues have gained prominence over the past 12 months amid rising geopolitical tensions. For instance, the US government’s decision to restrict access to AI startup Anthropic’s latest frontier models has sparked debate in India on the need to build domestic capabilities in AI, space infrastructure and other critical technologies.
Alongside sovereign opportunities, Viswanathan believes that Indian startups should also choose strategic global markets to increase their commercial success. “Given that US giants such as SpaceX are already busy with their large operations, Indian startups can sell their products to the global south and other markets. There’s no reason why Agnikul cannot offer satellite launch services to places like UAE, Oman, Saudi Arabia etc, as these will represent big business opportunities.”
Interestingly, two homegrown deep-tech startups have fulfilled Viswanathan’s large funding prophecy over the past two months. On 7 May, space startup Skyroot Aerospace raised $60 million at a $1.1 billion valuation to take its net fund-raise above $150 million. On 15 June, AI startup Sarvam raised $234 million at a $1.5 billion valuation. Mint met Viswanathan at his headquarters in San Mateo, California, on 3 June.
Strategy and investment focus
Viswanathan, whose firm today handles over $1 billion in assets under management through startups globally, is also on the board of the India Semiconductor Mission—a government programme that was notified in December 2021 with a $15 billion allocation to incentivize the creation of chip manufacturing infrastructure in the country. A second tranche of the scheme, with similar incentives outlay, is expected soon.
The top investor, who turned 63 this year, frequents India every couple of months—where he is also one of the founding stakeholders of India Deep-Tech Alliance (IDTA), which is a consortium of private tech companies and investors that has committed nearly $3 billion in investments to core technology companies in India.
Viswanathan, who divides his time between Silicon Valley and New Delhi, began his career as a research engineer in Wipro in 1987, before spending 19 years at Intel. Viswanathan stepped down as the vice-president of architecture and general manager of innovation and incubation from Intel in May 2012. He founded Celesta Capital in December 2018, through which he holds stakes in five Indian startups—rocket maker Agnikul Cosmos, digital radiology firm 5C Network, corporate healthcare provider Connect N Heal, AI marketing platform Pixis, and defence imaging and sensor maker Tonbo.
One such fund is Viswanathan’s own ₹2,000-crore ($215 million) deep-tech corpus, which he said is “in the process of being closed and announced.” While he did not specify a timeline, he said that he has identified three more Indian deep-tech startups for investment.
“One bet we’ve taken recently is on 1Cell, an AI cancer diagnostics platform in India. We’ve also committed funds to two more startups, but we’re yet to announce them. We’re also keen on select areas of the semiconductor value chain in India, but we do not plan to back full-scale chip fabs as they require billions of dollars,” he said.
Why India trails Silicon Valley
India, however, continues to lag in terms of the “overall appetite for large funding” akin to Silicon Valley, according to Viswanathan. To ramp-up local investments, the investor called for a three-point evaluation of the industry.
“The three things to consider in India for deep-tech are technology, people, and the market. People are still developing, and builders in India are still evolving in sophistication in their engineering and innovation capabilities (as Silicon Valley). This will take some time to evolve. The second is the market—while India is a big market, it lacks depth especially in areas where the government could play a big role through procurement,” he said.
As an example, Viswanathan said that while India has scaled digital payments among users, “we haven’t seen a giant successful private business grow on top of the UPI stack, or a big company created on the back of large domestic demand.”
Technology, however, is slowly evolving to suit local markets. “You look at a startup like GalaxEye, and you see the work they’re doing on optical and SAR (synthetic aperture radar) sensors in satellites—this is strategically crucial for India. The other is India’s focus on electronics and semiconductors—of course, there is the need for billions of dollars to develop core manufacturing and packaging technologies that rival China or Taiwan. To do this, the government funds are key, and are the right step,” Viswanathan added.
Despite the India Semiconductor Mission, Viswanathan said India should be “careful and strategic” in investing in semiconductors, as chip fabs “have nine to 12 years” of time before they are fully developed and start generating significant profits.
“Instead, there are low-hanging fruits in electronics such as communications and networking, or other fabless capabilities, where India can develop competency and make its presence large, through which it can catch up with mature markets.”