Theme : Science & Technology
GS - 3
TABLE OF CONTENT
- What is Deep Technology
- India-Strategic Fund
- Need of Funding
- Need of Deep Tech Start ups
- Challenges faced by Deep Tech Start ups
- Road Ahead
Context : In order to become a developed country in 25 years, India will need to build world-class deep tech capabilities in certain sectors.Prime Minister is making a concerted push for self-reliance in military technology, semiconductors and science-based businesses.
What is Deep Technology :
- Deep technology or hard tech is based on high innovation in engineering, or significant scientific advances, as opposed to ‘shallow technology’ or technology based on incremental development from existing tech ideas. Deep tech is often radically innovative and is aimed towards solving difficult and practical problems.
- They present challenges requiring lengthy research and development, and large capital investment before successful commercialization. Their primary risk is technical risk, while market risk is often significantly lower due to the clear potential value of the solution to society. The underlying scientific or engineering problems being solved by deep tech and hard tech companies generate valuable intellectual property (IPR) and are hard to reproduce.
India-Strategic Fund :
To solve this market inefficiency,we must examine setting up an “India Strategic Fund”. Certain innovations in the existing corporate social responsibility (CSR) budgets and high net worth (HNI) tax breaks will incentivise capital flowing into strategic tech.
Our way of life, economic and national security are underpinned to certain general purpose technologies (GPTs). Today, four technology battlegrounds exist:
- 5G communications technology
- revolutions in biology
- Technology of autonomy (eg, AI)
Each of these is vulnerable to military conflict, health emergencies and natural disasters. They are dual use technologies (ie, technology that can be used for both civilian and military applications) and have steep entry barriers.
Need of Funding :
- In the developed or NATO countries, the government is still the largest source of funds for Deep Tech — a cutting-edge, quantum jump in capability that creates an intellectual property moat. Billions of dollars of funding flow in through agencies such as the Defense Advanced Research Projects Agency, the Directorate of Defense Research and Development, much of which becomes the oxygen that small businesses survive on.
- This has allowed startups to emerge as a bridge between the IEEE publications or bench top prototypes of academia and production-hungry large industry. In India, this bridge remains unbuilt because of lack of funding.
- Globally, venture capital is cautious when it comes to Deep Tech. The Indian venture capital ecosystem is not willing to invest in revolutionary but risky ideas. An Indian investor agreeing to fund a laser start up from an IIT Madras laboratory or a battery company out of IIT Mumbai still exists in the realm of the imagination.
Need of Deep Tech Start Ups :
- First, the absence of deep-tech start-ups harms India considerably by weakening her capability to meaningfully address complex socio-economic challenges that afflict the society in multiple sectors. This includes agriculture, healthcare, transportation, education, energy, etc. India’s development challenges are so unique that innovators from developed countries, not familiar with local context or cost structures, will not be able to provide solutions.
- Second, the solutions that address the UN’s Sustainable Development Goals would necessarily have to be radically new and disrupt existing industries and business processes. Thus, requiring deep-tech start-ups.
- Third, in India’s population of 130 crores, only the top 25% (affluent and middle-class) benefit from the fruits of technological progress. In contrast, the remaining 100 crore people do not get enough or are substantially bypassed. This is because most of the hi-tech goods and services are designed in the developed world for rich people and can’t be bought by the poor.
Challenges faced by Deep Tech Start ups :
- First, they need a longer gestation for development than other start-ups. The latter might need from 1-3 years to reach revenue, while deep-tech start-ups need 5-8 years.
- Second, they require more capital, specialized talent, and expert knowledge in more than one domain to develop and validate a science-based innovation.
- Third, the risk of failure is high at every stage for a deep-tech start-up, usually higher than in the case of other types of startups. It is because the start-up has to work backwards and find a real-life problem that is worth solving using its technology. After this, it has to validate the adequacy and nature of the market demand for the innovation.
- Fourth, there are several venture funds in India, but most pursue relatively ‘lower risk’ investment opportunities. They are mainly interested in start-ups that exploit India’s growing consumption economy or those making cloned products.
Road Ahead :
- CSR has traditionally been utilized for the social sector. However, this growing corpus should also be used for the development of strategic technology. The Government should allow these funds to flow into certain strategic tech startups in sectors like semiconductor, AI, space, IT etc.
- HNIs can also be offered tax incentives to make equity investment in the same critical technology startups which would otherwise be frowned upon as high-risk investments. This would help mitigate the pinch felt with lower short-term returns.
1. What is Deep Technology?
Answer : Deep technology or hard tech is based on high innovation in engineering, or significant scientific advances, as opposed to ‘shallow technology’ or technology based on incremental development from existing tech ideas. Deep tech is often radically innovative and is aimed towards solving difficult and practical problems.
2. How can CSR be utilized?
Answer : CSR has traditionally been utilized for the social sector. However, this growing corpus should also be used for the development of strategic technology. The Government should allow these funds to flow into certain strategic tech startups in sectors like semiconductor, AI, space, IT etc.