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[Deeptech Investor] Inside BIF’s investments in deeptech, IP-enabled startups with global potential

Bharat Innovation Fund aims to build deeptech, ip-enabled startups from India that could compete globally. Somshubhro Pal Choudhary gives a rare behind-the-scenes look at the work that goes into the vision.

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Vaishnavi Desai
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Deeptech investment

Constituted in 2018 as an affiliate of a successful entrepreneurship centre, CIIE.CO, Bharat Innovation Fund has come a long way. It is one among a rare few deeptech funds in India. And they are on the road less travelled and definitely leading the way.

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In a conversation with DQ Deep Tech, Somshubhro Pal Choudhury, Partner, Bharat Innovation Fund gave us an insight into the construction of the fund, investment thesis, exit strategy and the opportunity for Indian deeptech startups to build locally and sell globally.

Edited excerpts

Origin of Bharat Innovation Fund

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Kunal Upadhyay started CIIE.CO, considered one of the top entrepreneurship centre in the country, in 2005. It has incubated 500+ startups, has 170+ investments, 85+ follow on and 35 exits under its belt.

Upadhyay and another partner Shyam Menon in 2013, started an affiliate fund of the entrepreneurship centre, resembling a Y-Combinator model, called Infuse Ventures and Bharat Innovation Fund became their second fund. When BIF started, additional 3 partners joined in.

Today, a lot of investors are investing in standard e-commerce, marketplace models. Silicon Valley and Israel have done deeptech investments so successfully. The entire focus of BIF is to create more such successful companies out of India.

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Since 2016-17 entrepreneurs have come out to form more deeptech, IP-enabled startups from India aiming majorly toward global markets. Bharat Innovation Fund focuses on it. Our investors came from global family offices, international corporations like Philips, Indian banks and financial institutions, government funds like SIDBI, and successful entrepreneurs from US and Silicon Valley. To date we’ve made seven investments—all deeptech, IP-enabled and competing globally. Some of the global customers include T-Mobile, Sprint, Nippon Life, British Telecom and French market agencies like Ipsos.

A decade back when the Silicon Valley companies were being set up, they were immediately setting up their R&D developments centres in Bangalore. Now we are seeing the reverse. Most of our portfolio companies have grown up and started in Bangalore, found the right product market fit and working with multitude of customers at a very affordable price. Now they are setting up their sales offices, channels in the US and expanding from there, with one of the founders even moving to the US to drive things.

What is your investment thesis?

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We analyse the market and technology rigorously. Then we look at the counterparts, in a competitive space, what is happening globally and in what areas. Many a times, because it's deeptech, we might just find a couple of companies out in India, but there might be 3-4 other startups out of the Silicon Valley, and maybe 1-2 in Israel.

We also analyse if the technology is defendable, team is able to execute and not just get the early traction from the Indian customers. We also check if the team has an appetite and the ability to go global.

We look at the traditional aspect of how big the market is. We take a lot of time to understand the different dynamics as the time for success for these companies would be 3-5 years. We look at the dynamics of the market, ecosystem, changes and further shaping up of it.

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We deeply look at competitive analysis, what are the kinds of different companies and technologies in this space at a global level. We run a complete scan of the patents that these companies are filing. We do a novelty search, then we look at the current traction.

We don't typically invest in seed stage companies. A lot of these investments happen through our entrepreneurship centre CIIE.CO. But we look at pre series A and series A. We invest in a USD 1-3 million cheque size and 2-8 million round size and reserve enough capital to invest in follow on rounds.

Importance of patient capital in deeptech and how does your exit strategy differ when you deal with deep tech startups? 

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Different kinds of deeptech comprising of deep science, biotech company, cleantech space requires a lot of patient capital. It takes a minimum of five years to see this kind of action. Therefore, we have to make sure as the company makes progress it gets through certain milestones, de-risks and additional investors come on board.

Hence a critical step is to check access to additional capital through other investors in the ecosystem both local and global. Many a times in India specially, there are not enough follow-on investors in the deep tech space as it is relatively new. We build bridges with the international communities strongly and if you see many of our follow on investments are actually happening from global investors. We also ensure that a large pocketed investor might come in alongside us when we invest in the very stage to have visibility for getting money from them in future as well.

Another aspect is more into enterprise tech. You still look at the deep tech component but those actually move faster than the deep science startups. That’s why we take a calculated bet across a few deep science ones and few enterprise tech ones.

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There are a lot of investor players in this field. Each one of them has trigger points when they want to come in. We alone aren’t taking that entire risk of patient capital. We co-invest alongside others, we make sure that there is visibility once the company reaches certain milestones there are multiple other investors in the pipeline. Many of them we tend to even bring in during our investment stage to gain that visibility. So patient capital has many different forms and shapes. It's not like our 1, 2 or 3 million investment is the only capital available to a startup.

What are your plans for BIF? How has the second Covid wave impacted your future plans?

From 2020 onwards we have all been impacted along with our startups. To a certain extent our startups actually have performed slightly better as compared to B2C sector startups. As most of our startups are into deeptech space, they were still building up their technologies, they were more focused on the digital transformation of customers that was already starting to happen which accelerated during the COVID times.

Few of our startups in the fintech space got impacted due to COVID because suddenly all these AI/ML based lending dried up but another piece which actually helped many of our startups was that they had a considerable amount of funding, runaway. They had enough cash in their banks and were focused on global customers too. This gave them a respite.

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