Investors bullish on deep technology start-ups

Investors are looking for AI start-ups that achieved meaningful traction and scalability

Angel investors and venture capital funds are chasing Indian deep technology startups because of their potential to scale up rapidly and be able to offer an opportunity for early exit.

There is excitement in the investor community over deep tech companies working on engineering innovation using augmented reality, machine learning and artificial intelligence (AI). As other start-ups look for funds, investors are searching for AI start-ups that have achieved traction and scalability. Deep tech entrepreneurs have raised millions of dollars in the past six months and most of these investments are for the long term. This trend will continue because of the high returns, according to industry observers.

“We are regularly receiving calls from investors. We raised a substantial amount from Denso International America last October and might not require funds for the rest of this year,” said Dinakar Munagala, chief executive officer of deep learning and vision processing start-up Thinci.

The trend of investing in deep tech companies started in the first quarter of 2016 when Microsoft and Salesforce acquired start-ups like Genee and MetaMind. In India, Apple acquired Hyderabad-based AI and machine learning start-up Tuplejump. Hyderabad Angels is evaluating several AI startups. “We are planning to finalise a couple of them in the next three months,” said PS Sreekanth, investment director  of the angel network. “Deep tech is the future of the start-up ecosystem in the country. These start-ups are expected to play a big role in healthcare, fintech and e-commerce,” he added.

Hyderabad-based early stage VC firm Endiya Partners recently invested in a Bengaluru-based healthcare AI startup SigTuple. It will make more investments in similar start-ups this year. pi Ventures has closed its $30 million maiden fund that focuses on start-ups using AI, machine learning and the Internet of Things. IDFC Parampara, an early stage fund, recently invested $1 million in cyber intelligence start-up Data Resolve Technologies and is evaluating another machine learning start-up in healthcare. 

The global AI market is expected to grow to $5.05 billion by 2020 from $419.7 million in 2014. It is likely to generate $47 billion revenue and replace 5 million jobs by 2020.

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