With $100M corpus, how Bharat Innovation Fund is betting large on deeptech startups


Elevating early-stage funds is an uphill climb for deeptech startups. The primary product is commonly costly to construct and takes years to launch. Not many are prepared to again these daring startups till the breakthrough of the applied sciences they’re constructing. 

This marked the inception of IIM Ahmedabad’s Centre for Innovation Incubation and Entrepreneurship (CIIE)-backed early-stage enterprise agency Bharat Innovation Fund (BIF) in 2018. 

The thought of curating BIF was to supply pre-Sequence A and Sequence-A funding to deeptech and IP-focussed startups, who in any other case stay outdoors the profile and deal circulate of most Enterprise Capital (VC) funds at their preliminary levels. 

This three-year-old category-I Enterprise Capital (VC) agency has to date funded seven deeptech startups, and has seven different investments in tech infrastructure/inclusion options, deploying nearly 40 % of its fund pool of $100 million.

The fund has secured commitments from institutional traders like SIDBI (Fund of Funds), ICICI Lombard, SBI Life, RBL Financial institution, Federal Financial institution, and corporates akin to Philips and Bajaj Electricals together with world entrepreneurs, household workplaces, and HNIs. 

The muse of BIF

Constituted in 2018, BIF is a deeptech-focussed enterprise fund that traces its origin in IIM Ahmedabad’s affiliated entrepreneurship centre CIIE.CO, which was began by Kunal Upadhyay in 2005. 

Kunal, together with Shyam Menon, went on to launch a clean-tech centered enterprise fund — Infuse Ventures, adopted by Bharat Inclusion Seed Fund and Bharat Innovation Fund, all beneath the CIIE.CO umbrella. 

Further three companions — Ashwin Raguraman (former COO of India Innovation Fund), Sanjay Jain (former Chief Product Supervisor at UIDAI and Chief Innovation Officer at CIIE.CO), and Som Pal Choudhury (former Managing Director of Analog Units, India) later joined to set the platform.  

Kunal says the thought of establishing BIF got here from two broad thematic areas that have been rising out of the Indian startup ecosystem. 

One was the creation of options that may have influence on the plenty and never restricted to simply the creamy layer, and second have been options for the world popping out of India.

“India was sitting on an exceptional quantity of information, tech infrastructure, and world R&D centres, which made it uniquely poised to make product improvements for the world and create options for Indian plenty that use expertise,” the founder says.

Figuring out gaps in each the alternatives, the staff determined to arrange BIF to again startups beneath these two particular themes.  

The ‘persistence’ capital  

Owing to the lengthy gestation interval, not many traders are prepared to spend money on deeptech startups, and often come within the later life cycle. 

It steadily requires bigger capital funding; state-of-the-art R&D services; a big community for strategic partnerships with potential producers, suppliers, and prospects; and a protracted incubation interval to construct merchandise. 

“The best alternative in India as we speak could also be is shopper tech (D2C), however the greatest alternative is deeptech. We’ve a chance to turn into a world chief in offering deeptech options, and extra capital must be channelised on this house,” says Kunal.  

He narrates the story of one in all BIF’s Chennai-based Industrial Web of Issues (IIoT) startup, Detech Applied sciences, which struggled to seek out traders initially. 

The IIT Madras-incubated startup acquired an preliminary funding of Rs 1 crore from CIIE.CO by means of its velocity fund and struggled to lift capital subsequently.  

“Regardless of popping out of the world’s high labs, attracting common VC funds for deeptech ventures is tough because the gestation interval is lengthy and understanding of the options is restricted. That is the hole that we wish to fill in with our particular stage fund (pre-Sequence A and Sequence A) that pushes the startup to the extent the place its market is developed,” says Kunal, including that BIF’s funding band sometimes ranges between $0.5 million to $2-3 million

The state of affairs is, nonetheless, enhancing as the general circulate of funds into the Indian startup ecosystem spurts and the following emergence of specialized or micro VC funds which are focussed on investing in area of interest areas.

One of many early movers within the house is Bengaluru-based Pi ventures (2016), which has invested in 13 deeptech and AI-focussed startups, and has had one exit to this point. 

Alternatively, early-stage VCs like BIF (2018), 100X.VC (2019), Inflexor Ventures (2019), and ArtPark (2021) are aggressively increasing their deeptech portfolio and the fund pool.  

The funding thesis

The 15-member staff at BIF rigorously analyse and give attention to three core areas – the market, staff, and expertise, earlier than signing the cheque. The startup choice course of is “fast and nimble”, says Kunal.

Whereas enterprise due diligence, BIF considers 4 key areas — the product-market-fit; the market potential — nascent market however quickly rising and has the potential to be massive or massive present market with a disruptive play or discontinuity; a robust worth proposition, scalability, and defensibility; and a robust staff to see if it has the urge for food and the flexibility to go world.

A majority of startups hit the roadblock relating to their understanding in regards to the market, says Kunal. He emphasises {that a} startup wants to choose up the appropriate market, a few of which could not even exist as we speak, however have a future potential. 

He continues with the instance of Detech and explains how the startup discovered its market match within the oil and gasoline sector a lot later and noticed important curiosity from traders like Accel Companions and Elevation Capital of their subsequent rounds. The corporate’s present portfolio contains industrial giants akin to Shell, Tata Metal, ExxonMobil, Adani Group, and several other Fortune 500 corporations.

“The market, expertise innovation, and sustainability of the startup must be in alignment with us. We take a punt on the staff, tech, and market, and see if the startup understands the IP. We additionally have a look at the altering market dynamics and the ecosystem,” says Kunal.  

Emphasising on the understanding of the IP, the founder says that deeptech is being loosely used lately. 

AI is just not deeptech in our thoughts. Creation of IP from deep analysis is vital fairly than mere utilization of AI,” he provides. 

Bharat Innovation Fund staff

De-risking a startup

BIF has already constructed up a major portfolio of seven investments, which incorporates credit-scoring platform CreditVidya, emotion recognition startup Entropik Tech, industrial Web of Issues (IIoT) startup DeTech Applied sciences, AR-enabled toymaker PlayShifu, and knowledge analytics platform vPhrase

Danger is inherent to a startup, however relating to deeptech, the probabilities of survival and the perseverance wanted is at a distinct degree altogether, explains Kunal. 

“The proper strategic steerage is extraordinarily vital for startups together with mitigation of expertise, regulatory, and execution dangers. Because the gestation interval is lengthy, we now have to verify the startup reaches a sure milestone, de-risks, and extra traders come on board,” he says. 

The massive umbrella 

BIF has been constructed on a decade-long startup engagement expertise of CIIE.CO, which has been main accelerator programmes and seed-funds in India since 2008 with help from Tata Trusts and companions, together with Division of Science and Know-how (DST), ADB, GIZ, Michael & Susan Dell Basis, Invoice & Melinda Gates Basis, SAP, CISCO, JPMorgan, MetLife basis, Siemens, Bosch, Castrol, HDFC financial institution, Mahindra Finance, Godrej, BP amongst others. 

Every fund, together with BIF, or a programme attracts the benefit of the much-bigger backend engagement of CIIE.CO with establishments, corporates, and authorities. 

“CIIE works because the engine operating on the backend. We’ve branded our funds (BIF, Infuse Ventures, Bharat Inclusion Seed Fund) in a different way, however all of them are managed beneath CIIE.CO. The intent is to construct an ecosystem for startups throughout rising and upcoming sectors,” says Kunal. 

The chance forward

India has the potential to be the cradle of innovation-first ventures for the world, says Kunal, who bets on the rising innovation in sectors like healthtech, spacetech, enterprise tech, and biotech.  

“International game-changing merchandise will come out of deeptech. It is a multi-billion greenback alternative and we’re backing game-changing improvements that might be made in India, for the world,” says Kunal. 

In accordance with a Nasscom-Zinnov report, over 2,100 Indian startups have adopted deep applied sciences in 2020, up from 1,600 in 2019. Over 14 % of the whole startup investments went into deeptech ventures, which is 11 % larger than in 2019. The report additional highlights that deeptech will proceed to develop at a CAGR of 40-45 % in 2021.

“Within the subsequent 10 years, no less than a 100 deeptech globally altering corporations of consequence, which can go on to turn into unicorns, will come out of India,” says Kunal. 

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