Startups focusing on disruptive tech that can solve complex global problems are in demand
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Several deep-tech startups in India are being acquired by larger global companies to gain access to niche technologies and quality talent, indicating a strong demand for startups focusing on disruptive tech that can solve complex global problems.
In June, KPIT Technologies Ltd announced the signing of a definitive pact to buy a controlling stake in Bengaluru-based PathPartner Technology for about ₹191 crore. The latter is a specialist in providing product engineering services to customers across automotive, consumer electronics, broadcast, medical and IoT domains. PathPartner has an offshore research facility in California besides a presence in Germany and Japan.
In May, General Atlantic-owned KFin Technologies, a Hyderabad-based registry services firm, took a 17% stake in insurtech startup Artivatic.ai for an undisclosed sum. The acquirer also has an option to raise its stake to majority holding in Artivatic.ai. The investment is expected to help KFintech venture into insurance tech as it looks to diversify its offerings.
In September, US-based cloud video surveillance firm Eagle Eye Networks acquired Bengaluru-based AI startup Uncanny Vision to boost its capabilities in artificial intelligence (AI) and analytics. Its deep learning algorithms enable recognition, identification and prediction to improve business operations, customer service, and site safety.
A month later, Accenture agreed to buy BRIDGEi2i, an AI and analytics firm based in Bengaluru. The deal is expected to add about 800 tech professionals to Accenture’s Applied Intelligence practice, strengthening its global capabilities in data science, machine learning and AI-based insights.
Deep-tech startups are those whose business models are based on high-tech innovation in engineering or significant scientific advances. India had about 2,100 deep-tech startups as of 2020, as per industry body Nasscom.
To be sure, Nasscom launched the second edition of its deep-tech mentoring programme called Deep Tech Club (DTC) 2.0 earlier this year. The initiative aims to nurture and promote Indian deep-tech startups and discover disruptive startups enabled by AI, ML, augmented reality, virtual reality, internet of things (IoT), robotics, blockchain, natural language processing (NLP) and similar technologies.
Deep-tech companies are increasingly targeted for acquisitions for two possible reasons, said industry experts and investors. “One is, large companies may want to fill certain technology gaps in their portfolio. The other reason is a very good tech team of a startup may be working on the wrong problem. So, that startup might get aqui-hired to bolster their tech talent," said Vinay Bansal, founder and chief executive officer, Inflection Point Ventures, an angel investment firm.
Huddle, an accelerator and fund for early-stage ventures concurs with the view. “Many large companies look to acquire niche deep-tech startups to gain access to a technology stack that they may not be able to build on their own as many of them may not be digital natives. Often, such acquisitions also offer quality talent at an affordable cost," said Sanil Sachar, founding partner at Huddle.
Kishor Patil, CEO of KPIT Technologies, said his company acquired PathPartner because it realized that the latter’s competence in the operating system software and low-level software and existing semiconductor partnerships for early access to platforms is key to delivering complex production programs. “Together, we (KPIT Technologies and PathPartner) can offer differentiated offerings for new-age vehicle architectures and strengthen our software integration expertise," he added.
Likewise, one of Huddle’s portfolio, NeuroPixel.AI, a deep-tech AI/ML startup, has already seen large companies showing interest in their solutions and potential partnerships, said Ishaan Khosla, founding partner at Huddle.
Interestingly, many of these startups are being acquired in their early stages when a majority of the fundamental suite of technologies are built. Khosla concluded, “Larger companies, that are not traditionally tech-first, look to acquire or partner with these deep-tech firms to access technology or talent."