Bio Pharma Deep Tech : India’s Next Frontier for VC Gold
What is Deep Tech?
Deep Tech is used to describe Companies that work on innovations based on technological or scientific breakthroughs. Through novel technologies, these companies hold the potential to disrupt existing business models and bring about structural industry shifts. A deep-tech company typically has the following characteristics –
Problem Solving through Scientific DiscoveryUse of Novel Technology, usually InterdisciplinaryR&D at the core of the product offeringCreation of Intellectual Property
Indian Deep Tech has been a Rocket Ship
India is home to 3000+ Deep Tech Startups which make up 12% of the Indian startup ecosystem. This is a rapidly growing sector with a 53% CAGR over the last decade!
Some of the Core Areas across which startups have emerged –
· Artificial Intelligence (AI), Big Data and Analytics, Internet of Things (IoT) and Blockchain, AR/VR, Robotics, Drones, 3D printing
With a large number of startups coming up, there are emerging areas which will see disruptive innovation in the coming decade –
· Life Sciences, Space Tech, Web 3.0, Quantum Computing, Cyber Security,
GOI’s National Deep Tech Startup Policy (NDTSP)
NDTSP is a draft policy that has been released by the GOI in July 2023. This policy aims to create a comprehensive framework that addresses challenges faced by Deep Tech startups and provide definitive interventions to further the ecosystem.
Some of the Key areas that the policy covers –
1. Strengthening of India’s Intellectual Property Rights (IPR) Regime
2. Facilitate Targeted Long-Term Funding
3. Enable Shared Infrastructure and Resource Sharing
4. Initiate Capacity Building, Attract and Retain Key Talent
5. Strengthening the research ecosystem by enabling Industry Academia connect
This policy, once in effect will go a long way in bringing structural changes that will propel the overall innovation ecosystem forward. It will also facilitate the sustenance of startups during key phases thus helping them overcome the Valley of Death.
Life Sciences Deep Tech is emerging as a New Frontier in India
With an average drug taking around ~13 Years to go from development to commercialization costing an estimated $ 2.6 Bn, the conventional route of Drug Discovery and Commercialization is long and prohibitively expensive.
Conventional Drug Discovery and Development Lifecycle
The law of diminishing returns has started to play out in small-molecule Drug Discovery globally, with steadily declining efficiency. It’s getting harder to find drug targets for complex conditions and even harder to find compounds that don’t exhibit off-target activity. The fact that many such conditions affect smaller populations make pursuit of such drug discovery programs commercially unviable for larger corporations, leading to an increasing focus on therapies like Oncology, etc.
With the advent of AI, this is set to change significantly. At each stage in the process, AI is creating value by reducing the lead times and improving the efficiency of the process thus significantly reducing both capital requirement and overall developmental timelines.
Some of the Notable Companies in the Bio Pharma Domain
There are multiple areas within Life Sciences where we are seeing emergence of Indian Startups.
Emerging Domains in Life Sciences
The overall capital requirements for drug commercialization will continue to remain high and even in developed Biopharma ecosystems like the USA, the trend has been for small pharma and biotech to bring clinical assets to a certain stage and then out-license them to Big Pharma players who have the financial muscle to successfully commercialize these assets.
The M&A route is highly preferred by larger players as it significantly reduces their time to market and reduces the risk associated with earlier stages of drug discovery and this has been a key driver of growth in Big Pharma globally.
We see that the nascent drug discovery ecosystem in India has the potential to leapfrog by leveraging technological advancements in AI and reduce costs and timelines significantly. Such advances help in levelling the playing field from a resources standpoint and enable smaller, under-resourced players to pursue cutting edge scientific innovation.
An important factor that would enable this is risk capital from VCs and Larger Corporates who have the capabilities to evaluate such opportunities and willingness to make patient bets.
While there are risks associated with investments in technology driven companies, there are many ways to mitigate them (in-depth technical and expert analysis, appropriate deal structuring, phased investments, etc.) and the returns from groundbreaking technologies, especially in Life Sciences can create truly outsized returns for an investor.
If you’re a startup in this space looking to raise funds or a VC looking to build your thesis or for investment opportunities in this space, write to us at aditya@loestro.com to have a more detailed conversation.
