VC Insights | Issue# 5 [September 23, 2024]
India’s Growing Spacetech Sector
The Indian space industry has made remarkable progress in recent times, with major accomplishments like the Chandrayaan missions. The Indian government recently approved the expansion of the Chandrayaan-4 mission, aimed at returning lunar samples to Earth, to incorporate preparatory steps for a cost-effieicient, future manned moon mission. Additionally, it sanctioned the development of the country’s first space station module and the Venus Orbiter Mission.
Government Support: There is a strong emphasis placed by the government on the space sector, which offers substantial support to enhance the sector’s growth and capabilities. Recent policy shifts, particularly, opening the space sector to private companies, have encouraged the rise of spacetech startups. Initiatives, such as the Indian National Space Promotion and Authorization Centre (IN-SPACe) and the Indian Space Policy 2023 have provided a platform for private sector growth.
Support from the Indian Space Research Organisation (ISRO): ISRO has been exceptional in spearheading India’s noteworthy progress in the space sector. Apart from working closely with the Indian government and the space industry (private and public), it has played a major role in supporting the growth of spacetech startups. A few startups contributed to ISRO’s work by producing components used in the Chandrayaan-3 spacecraft in 2023. This collaborative environment between ISRO, industry, and startups has led to the development of a thriving spacetech ecosystem in the country.
Insights from Lightspeed Venture Partners: Hemant Mohapatra, partner at Lightspeed, India, offered such interesting insights about the current state of India’s spacetech ecosystem, its future, the VC firm’s strategy with regards to the sector, importance of support from the government and VCs, and more, during a recent interaction with Inc42. More here. Insights from Hemant during the interaction with Inc42 below.
Rise of Spacetech Startups
As reported by Inc42, India now hosts over 150 spacetech startups, including Pixxel, Agnikul, Skyroot, GalaxEye, and Satsure. These companies are actively collaborating with ISRO and also benefitting from government support. Spacetech as a sector has attracted over $285 Mn in funding between 2014 to 2023, and its growth potential is vast, with opportunities expected to exceed $77 Bn by 2030. Additionally, active support from VCs is playing a crucial role in helping establish a strong spacetech ecosystem in the country.
Lightspeed’s Investment Strategy
Spacetech as a sector has come into focus after other sectors with venture funding have matured, giving investors the opportunity to diversify investments into innovative, hard-to-build, state-of-the-art solutions. Lightspeed India has a strong focus on businesses that offer global solutions and repeatable revenue models. The spacetech sector fits well into this strategy, especially with companies like Pixxel (the only spacetech investment made by Lightspeed India), which builds satellites for capturing earth imaging data and offering long-term services based on the same.
Hemant mentions that satellites providing telecommunicatons could also make for a compelling repeatable business model. Although Lightspeed has not made an investment in the spacetech sector after Pixxel, the VC continues to explore investments in the sector, prioritizing companies with world-class teams building innovative global solutions with technology. However, multiple factors influence investment decisions for Lightspeed, such as technological and engineering risks, price, size of the fundraise, and more.
Talent and Innovation
The availability of local talent, including experienced engineers and veterans from ISRO, has been critical to the growth of Indian spacetech. Startups are developing innovative technologies like satellite manufacturing (including Pixxel) and space asset monitoring (includes space and ground systems). Rocket companies, such as Skyroot and Agnikul, are building repeatable models, and new ventures are addressing various needs in the sector, including space-based telecommunication services. However, the sector needs more top-notch talent from India to come together and build for the world, adds Hemant.
Challenges and Opportunities
Addressing the Skill Gap: Although India has a vibrant spacetech ecosystem, there are siginificant gaps in terms of skilled talent. Bridging those gaps is essential for sustained growth. The time is now ripe and the sector needs a lot more of such world-class talent from India to come forward and build disruptive innovative solutions for the world, feels Hemant.
Government Support: Support from the government, not only in policy but also through guidance and commercial contracts that help startups scale and grow across India and the globe, is very important for spacetech. Actively fostering trust in startups to contribute to the national space program will go a long way in strengthening India’s spacetech ecosystem. Lastly, strengthening the growth of allied sectors, such as semiconductors, will benefit spacetech immensely, as the supply chain within the space ecosystem is highly fragmented.
Venture Capital: When it comes to capital investments, the leading VC firm believes that spacetech, like any deeptech (defence tech, cleantech, semiconductors, and AI), is hard-to-build and takes longer time to find product-market fit, scale, and profitability. More patient capital and experienced investors are needed to back the deeptech sector. However, deeptech startups offer significant rewards when successful.
Global View and Future Potential
India’s indigenous space capabilities, developed partly due to past international sanctions, including the ones put by the US, have given the country a competitive edge. India is among the select few countries capable of launching missions to space, Mars, and the Moon, and doing so at a remarkably low cost. The goal now is to prove the commercial viability of its space technologies. Indian technology is being validated across various sectors, including telecom, earth imaging rockets, manufacturing of satellites, and the focus in the coming years will be on demonstrating world-class innovation at competitive prices. Hemant believes that India will become a preferred supplier for space and semiconductor technologies to both neighboring nations and Western countries in the near future. For this to happen, India must continue to build trust-based relationships and deliver world-class technology.
Thoughts
We feel that sector-specific insights, such as the ones presented by Hemant, are invaluable to not just anyone interested in Indian startups and VC ecosystem, but for the startups as well. The founders would be aware of what to focus on to catch the eye of a leading VC like Lightspeed. It is amazing how the VCs have a bird’s eye view on the entire startup ecosystem at all times, although they may not be investing actively.
Bridging the Skill Gap: We certainly appreciate the active role of the Indian government and ISRO in helping the Indian spacetech ecosystem grow through sector-specific policies, guidance, and work. The time is ripe for the country’s academic institutions and skill-development platforms (digital and offline) to focus on state-of-the-art space education and training, respectively, to encourage more world-class talent. Developing the infrastructure for space education is a challenge and that is where there is scope for the government and private players to work together. Additionally, we would love to see the successful spacetech startups create content to share some of their knowledge and experience for budding spacetech enthusiasts. We are glad that VCs are viewing spacetech investments positively and fostering an entrepreneurial mindset in the sector.
Development of Allied Sectors and Indigenous Capabilities: The Indian government is taking steps to boost the semiconductor industry in the country. The growth of such sectors allied to spacetech is very important for its success. Promoting indigenous manufacturing of spacetech hardware within the country, coupled with the ability to procure components at a subsidized rate, will be key to enhancing the the sector’s supply chain and growth.
Closing Note: The progress made by the space industry would directly benefit industries, such as defense, telecom, climate tech, remote sensing, media and broadcasting, and more. We are glad that the nation’s space program is a healthy collaboration between the government, the nation’s premier space institute – ISRO, the industry, and spacetech startups. This partnership is paving the way to take the country far, higher, and beyond.
If you are interested to learn more, feel free to check out this coverage by Inc42.
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Acronyms used in the blog that have not been defined earlier: (a) Venture Capital (VC), (b) Million (Mn), (c) Billion (Bn), (d) Artificial Intelligence (AI), and (e) United States (US).