Tuesday, April 18, 2023

With 'Easy Money' Off The Table, Deep Science Tech Investing Offers Moats And Long-Term Value Creation For Investors

With 'easy money' off the table, investing in deep science tech startups offer deep moats and long-term value creation for investors, says Ritu Verma, Managing Partner & Co-founder at Ankur Capital, at a panel on fundraising at the flagship TechSprouts Deep Science Forum 2023.

The flagship TechsSprouts Deep Science Forum 2023 was hosted by Ankur Capital and Hello Tomorrow, Asia Pacific in collaboration with the Wadhwani Research Center for Bioengineering (WRCB) and the Society for Innovation and Entrepreneurship (SINE) on 17th April at the IIT Bombay campus. The event brought together all the stakeholders in the deep science ecosystem - researchers, startups, universities, venture capitalists, and industry partners to network and collaborate on scaling up the deep science ecosystem.

Deep science solutions are technologies driven by substantial scientific or engineering breakthroughs. Inventions from such scientific labor include the computer, the laser, CRISPR (for gene editing), and electric vehicles. Most deep science tech have their beginnings in university or corporate research labs and end up in applications across sectors from healthcare and biotech to clean energy to agriculture to aerospace.

In her keynote address, former Secretary of the Department of Biotechnology, Dr. Renu Swarup highlighted, “The number of biotech startups in India grew from 50 companies in 2012 to over 6000 startups today. There are now 750 startups with valuations over 3500 crores. By 2025, the bioeconomy is expected to record 10,000 startups and achieve over $100 billion in value.” She also noted that deep science is interdisciplinary. Biopharma is one sector. Deep science solutions are needed to drive growth in other sectors as well.

Investors emphasized the importance of achieving scale. Arun Dubey commented, "Keeping quality and economics tight are the biggest challenges." For deep science tech startups to achieve commercialization, they have to prove their economic viability in a relatively short period. Translating an early stage technical proof of concept (PoC) to a commercial stage PoC is an extensive challenge. Parameters that can be controlled at the 5 gram scale are very different from the 500 tonnes scale. Founders have to tackle fundamental engineering challenges ahead of business models.

Deep science tech startups are often deemed more risky than their mainstream digital counterparts but Vibhore Sharma, Partner at Capital2B, emphasized, “Value creation is simply different for this ecosystem. We’ve borrowed from the digital playbook but we need our own models for deal structuring and valuations.” While typical VC-backed startups follow a fundraising series tacked with comparables and revenue multiples, the value of the underlying technology at deep science startups can be different from the value of the product in the market.  Dr. Hemang Shah, India Engineering Lead, Qualcomm, stressed the importance of intellectual property (IP) strategy of a company as a core component of its business strategy - using it to fundamentally drive value. Deep science startups then often look to industry capital at the growth stage, which is more strategic in nature.

Hello Tomorrow, co-host of TechSprouts Deep Science Forum 2023, is a pioneering deep tech organisation accelerating the transfer of science-based technologies to solve some of the world's most pressing industrial, environmental and societal challenges. Xinyi Tow, Managing Director at Hello Tomorrow, Asia Pacific invited Indian deep science startups to the Hello Tomorrow Asia Pacific Challenge 2023 in Singapore October 4-5. She urged entrepreneurs to leverage the platform to take their solutions from India to the world. Startups showcased during the forum included Aumsat, Avisa Myko, Manastu Space, MyoWorks, Ossus Biorenewables, Piatrika Biosystems, and Voltrez.

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