Robotics, precision manufacturing hot bets for investors: Accel's Prakash

Accel's Prakash says India will become precision manufacturing powerhouse for aerospace and defence in next few years

Robotics and precision manufacturing, along with areas that combine soft technology with hard manufacturing, will be the hot areas for venture investors and founders in the near future, according to Prashanth Prakash, a partner at leading venture capital firm Accel.

 

Noting that there is now a marrying of soft tech and hard manufacturing, he said a gap exists globally in coming together of it in robotics and precision manufacturing.

 

“The number of aircraft that need to be manufactured for just the demand in India is 7 times the capacity present at the two of the large plane makers or any of these other companies. India has a unique advantage to be able to complement and provide that additional capacity in aerospace,” said Prakash in an interview while unveiling the 'Bengaluru Rising' report by UnboxingBLR Foundation during the Bengaluru Tech Summit event.

 

Though traditional companies have mainly focused on these spaces, Prakash said a lot of entrepreneurs and venture capital firms are expected to tap these areas and put in investments.

 

“Areas such as space tech and aerospace will create an industry that is much larger than the software-led startup industry that we have seen,” he said.

 

“Founders seem to be comfortable today dealing with manufacturing firms, which are slightly different in nature compared to pure software companies. We think that India will become a precision manufacturing powerhouse for aerospace and defence in the next 10 years. Accel is very bullish on this space, and you will see a lot more startups in this space,” he added.

 

These startups are being incubated at facilities such as Artpark (AI & Robotics Technology Park), set up by the Indian Institute of Science (IISc), and incubators at various Indian Institutes of Technology (IITs) across the country.

 

India’s emergence as a global hub for precision manufacturing and sourcing has been driven by its technical capabilities, skilled workforce, cost advantages, and enabling government policies, according to industry experts.

 

The industry splits into two major sectors: automotive (52 per cent) and non-automotive (48 per cent). The automotive sector is on a robust growth trajectory, with  original equipment manufacturer (OEM) demand - 62 per cent of auto component needs — expected to achieve a 14 per cent CAGR until FY26, driven by production increases and price realisations, according to Ascertis Credit. It said auto component exports are also set to grow by 7-9 per cent from FY24-29, propelling the precision machining market to a 12 per cent CAGR.

  The Indian aerospace and defence market, valued at $27 billion in 2024, is projected to double by 2033, according to the Ascertis Credit report.

 

IPO boom 

Prakash said the funding environment, which has witnessed a slowdown, was buoyant right now with almost 100 per cent quarter-on-quarter growth.

 

The total funding raised by homegrown startups doubled year on year (Y-o-Y) to $3.4 billion in the third quarter (Q3) of calendar year 2024 (CY24), according to industry reports. Indian startups raised approximately $1.7 billion in the corresponding period last year and nearly $3 billion in Q3CY22.

 

“We see this kind of gain momentum accelerated and catalysed by the IPO opportunity seen in the country. That was the last missing piece in the startup ecosystem and now the puzzle is kind of complete,” said Prakash.

 

Recently, food and grocery delivery firm Swiggy’s Rs 11,327 crore initial public offering (IPO), the second biggest this year and sixth-largest to hit the domestic market, has emerged as one of the largest liquidity events for risk investors in India, with early backers like Accel, Prosus, Elevation Capital and SoftBank reaping significant gains.

 

Due to such events, the investor ecosystem has also changed.

Prakash said that now a lot of domestic investors including family offices were getting active to invest in startups compared to attracting only global funds in the past.

 

“A lot of our portfolio companies are planning or preparing to go public. Next year, there will be 10 plus IPOs from Bengaluru alone,” Prakash said. 

According to the 'Bengaluru Rising' report, Bengaluru has emerged as India’s top job destination, attracting talent not only in tech but also in non-tech and blue-collar sectors. 

Despite challenges, Bengaluru's advantages in jobs, salaries, safety, air quality, weather, and real estate costs make it the most attractive Indian city for young workers, NRIs, and expats.

 

“We have leveraged a lot of startup data to understand how a city is performing related to economic capabilities, adoption of products, talent pool and livability,” said Prakash, who is also chairman of UnboxingBLR Foundation.