What do deeptech startup investors look for?

The most common trait among all entrepreneurs is that they strive to build their business based on an innovative idea and a scalable business plan. They have to formulate a path that can take their business to the next level and then gather a supportive team who can contrive and deploy innovative services or products in the market. Eventually, they succeed in getting funds, and with a moderately disruptive idea, they get themselves growing!

Yes, most of the startups happen to be started in much the same way, except for some that belong to odd domains/markets, which are either very old or challenging, or those that are relatively newer. The deep tech domain, for example, is quite a new market, and these startups are also quite different from the regular B2B or B2C companies that you read about daily. 

Now, the question arises – “how is a deep tech startup in India different from the regular startups of the country from other domains?

The business model of the deep tech companies depends on high-tech innovation and significant scientific advances in engineering and science. DeepTech deals with numerous problems that affect our society and the environment and works to mitigate them through technical solutions. They have a pivotal role to play in every industry- be it healthcare, agriculture, etc. However, they face challenges in commercializing their product as it takes years of research, which is followed by deploying the scientific solution in the market. The only thing common between the deep tech startups in India and other companies and startups is that the deep tech entrepreneurs too, have to go through risks, pave out ways to tackle them, and look for building successful ventures. 

DeepTech startups need to understand the gap in the market and create products, and services that can be built around the advancing technology, which involves AI, machine learning, robotics, and more. However, it is when they want to take their solutions from the lab to the market that most startups and entrepreneurs fret about, mainly because this requires capital, and often a significant amount of it. This is where VCs, DeepTech Funds and other fundraising companies/investors come into action to fund the complex yet promising startups from the DeepTech domain. However, it is to be noted that the DeepTech investors in India are very much critical of their choice. Nonetheless, it is their initiatives that can help this enthusiasm surrounding deep tech companies grow, leading to the growth of deep tech startups. It is they who can provide the deep tech entrepreneurs with their crucial initial funds. 

Now, the process is not as easy as it is said, the entrepreneurs and startups need to go through a lot of trial and error processes to get what they dream or deserve in the industry. Besides, they must also be grounded, efficient, secure, transparent, exhibit fair practices, clear government standards, and more. This entire journey is long and windy, and much of the precious time of the startups. However, SanchiConnect is making it possible to reduce the time for deep tech startups. With a disruptive aim of building a network of VCs, Angel investors with potential DeepTech entrepreneurs, the company is effectively empowering the startups of the deep tech domain. They are a team of DeepTech admirers who have built a platform out of a passion for helping the DeepTech industry cross every milestone effortlessly. They shed light on the investors who are willing to support DeepTech founders and startups from India, and conversely, they help the startups see the light of the day. 

5 Aspects that Determine whether the DeepTech investors would bet on a DeepTech Startup in India!

Investors look at their profitable factors straight away; they focus on the life cycle of the business and try to understand whether it would be able to fill the gap and earn them the capital and more in return going forward. The investors also monitor the possible risks involved before providing capital to any DeepTech company. 

Now, the investors are of various types, and so are their demands. But, the most sought-after is an Angel investor who is ready to take the risk and has a passion for innovation. However, they prefer well-established businesses rather than pre-seed or seed-stage businesses. Angel investors usually help an entrepreneur to remain in business for a longer time, and they also help to get better rates of return. On the other hand, Venture Capital funds prefer to invest in early-stage businesses and startups. But, the aspect that converges all the fundraisers is the DeepTech startup selection process.

Here comes the most obvious question that many might wonder – “what do investors actually look for while funding any startup?”

The selection process of the Deeptech investors in India can be summed up by the 5 most pertinent questions that are probably always ready with while deciding to fund a particular startup. The questions are:

“Does the DeepTech startup enjoy brand awareness/brand recognition?”

DeepTech startups in India need to go through multiple rounds of pitching and discussions with the investors and show them how they are building a way to tackle an age-old problem or what would be the return policy after 5-6 years. It is quite understandable that the DeepTech industry does not provide an immediate return unlike some industries and so there are chances of some risks indeed. The DeepTech startups must have a stable workforce who would give their best towards driving as much return as possible, which they must prove out and out on the first day itself to convince the investors. 

“How long will it take for the startup’s products to be manufactured and marketed?”

Investors are here to make money, so they scrutinize every other thing before deciding to fund a startup. They are far more vigilant while investing their money in newer technologies and startups belonging to the relatively newer industries. For deep tech startups in India and their likes, the prior work of the investors is to judge the product and understand its working prototype. They have their own metrics to check how the business is and how long will it take for the products to be manufactured and marketed. Next, the investor needs to understand how long it will take for the technology to develop from its early stage and by what time it will gain a wider market space. Moreover, the scaleability of the products also matters much here. Ultimately, they have to decide whether the investment would bring profit, and the rest depends on experience and gut feeling.

“Is there a demand for the DeepTech startup’s products/services?”

The development of a new technology that would solve the problem from its core is time-taking. Besides, the deep tech investors in India also need to find out whether the product will be adopted by the people or will become non-existing. The products must be able to pull the target audience or prove to be a better alternative than the services or products that are already available in the market. However, predicting that is quite hard, which makes the overall process long. Here, the startups need to find out ways to convince their investors that there is a demand for their products/services and this demand will grow to get the funding through. Along with that, the DeepTech startups must also have a dedicated team along with a solid business value proposition. 

“Will the product be accepted by the market?”

For DeepTech startups, monitoring the customers and collecting their views is difficult before they start the deployment. However, finding out whether the products will be accepted in the market and will continue to retain their value, in the long run, is significant for the investors. This ensures that the products/services will bring other potential customers and help the business scale in terms of revenues. The acceptance of the products is a crucial factor that decides the funding of deep tech startups as well.

“Will the DeepTech startup sustain until the results are obtained?”

Other than these, the presentation, pitch, and the founder’s passion for scientific research are some of the other aspects that pull an investor towards a deeptech in India. It becomes imperative for the Deeptech investors to understand the depth and knowledge of the entrepreneur during the pitch and all the successive rounds of communication. Furthermore, it is also important for the investors to understand whether the entrepreneur has the confidence to carry out the scientific research and the company operations till they start solving problems and earning revenues. 

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