Deeptech Startups in Vogue, Attract Strong Investor Interest in Last 5 Years 45 per cent of startups in India originate from tier-II and -III cities, a noteworthy trend, backed by the need to solve local problems, diverse funding options, improved infrastructure, robust digital payments systems, and digital-first business models
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Deeptech startups focusing on artificial intelligence (AI), robotics, biotech, and quantum computing are in focus today and they have attracted strong investor interest in the last five years, securing around USD 850 million in funding, according to a KPMG report launched at the ongoing TiE Global Summit in Bengaluru.
The startups involved in this space make up about 12 per cent of India's startup landscape, with over 3,600 companies. Government initiatives such as the National Deep Tech Startup policy, support this growth, alongside venture capital funding. India, with its strong Science, Technology, Engineering and Mathematics (STEM) foundation, with 34 per cent of all graduates opting for STEM, is well-positioned to lead deeptech innovation, the report said.
The generative AI market alone could generate economic benefits between USD 2.6 trillion and USD 4.4 trillion annually. Over 2,600 deeptech startups exist in established hubs, with more than 250 new deeptech startups incepted in 2023. In 2023, the inception of new deeptech startups in rising hubs doubled to over 110, marking the highest growth in five years.
Rise of Emerging Startup Hubs
The increasing significance of tier-II and -III cities as startup hubs in India is a noteworthy trend, backed by the need to solve local problems, diverse funding options, improved infrastructure, robust digital payments systems and digital-first business models, all of which have attracted investors.
While Bengaluru, Delhi and Mumbai have been the traditional unicorn hubs, securing over USD 8.1 billion in funding in CY23, other cities including Pune, Chennai and Hyderabad are carving out their own space in the startup ecosystem. This is largely due to prestigious educational institutions, a rich talent pool, strategic locations and supportive government initiatives.
The startup growth rate in tier II cities has seen a 15 per cent upsurge. Further, the FY24 economic survey revealed that over 45 per cent of new startups are now arising from these tier-II and tier-III cities. The main drivers of startup growth in these cities include lower operational costs, access to untapped markets, evolving consumer preferences and a less saturated competitive landscape. Funding within tier-II and -III cities has also surged, reflecting investor confidence in these emerging hubs.
Karnataka has been at the forefront of democratizing entrepreneurship by making it available across the state including emerging hubs like Hubli, Belgaum, Dharwad, and Mysuru, said Sanjeev Kumar Gupta, CEO, Karnataka Digital Economy Mission (KDEM) in a keynote address at the summit.
