The absence of a deep-tech ecosystem in India hinders attempts to provide the Research, Development and Innovation (RDI) fund worth ₹1 lakh crore to deserving start-ups, as per Neelkanth Mishra, Member of the Prime Minister’s Economic Advisory Council, during a fireside chat at the Internet and Mobile Association of India (IAMAI) event.
Speaking at the launch of the AI Council of India in Mumbai, Mishra acknowledged the challenges to risk capital access in India, extending the same to the disbursal of the government’s flagship deep-tech financing initiative.
“We can’t deploy the money we have. There are good people, but it’s not enough to absorb that ₹1 lakh crore,” said Mishra, who sits on the RDI fund’s second-level fund manager selection committee.
Deep-tech ecosystem shortfall
He attributed this shortfall to a deep-tech ecosystem that is yet to mature creating a gap between venture capitalists (VCs) and qualified start-ups that deserve financial support. Despite the risk appetite among start-ups, VCs have no visibility into the deep-tech community or its benefits in terms of an RoI, resulting in more investment going towards better understood ventures like e-commerce.
Taking the example of chip designers, Mishra said, “I notice that there are chip design companies coming up in India. Some of these companies require $100, $400 million, or sometimes even more to develop. [But] that ecosystem doesn’t exist. Our venture capitalists are still building that muscle, the ability to understand which founder is faking it and which is real.”
When asked to list one constraint that matters most to India’s AI future, Mishra listed capital as well as talent. He attributed the ‘brain drain’ in India’s talent pool to a lack of opportunities and proper compensation.
“If they want to do cutting edge work, they have to go outside. It’s also about money. We can’t afford to pay them,” said Mishra, urging the community to accelerate the build-up of the risk capital universe, to stop the brain-drain. Further, he asked India to focus on building a manifested research ecosystem.
“The moment you have high-quality research happening, the confidence of venture capitalists who invest in Indian start-ups will start to happen as of now unfortunately we do not have cutting edge research and especially,” he said.
From a global perspective, Mishra pointed out US to be leading in risk capital, possibly 10 years ahead of India. At the same time, he noted that China despite its state-directed investment has “already lost the race.” Overall, Mishra was optimistic of India’s ecosystem evolving over the next few years allowing easier access to much-needed funds by start-ups, encouraging institutions like IIT to act as feeder points for funding.