BENGALURU: The India-Pakistan conflict has now put the focus on the country's defence tech and drone start-ups. Venture Capitalists are also showing growing interest in investing in these companies.
According to data sourced from Tracxn, the total equity funding raised by drone start-ups in India is $414 million so far, and there are 487 such start-ups in the country, which include ideaForge, Zen Technologies, DroneAcharya, Garuda Aerospace and Marut Drones, among others.
Out of these, 132 start-ups are funded, with 28 having secured Series A+ funding. Many of these drones are used for civilian applications and infrastructure inspection. Start-ups such as ideaForge are into dual-use categories -- civil and defence.
Some of these start-ups are also into defence tech. Tracxn data suggests that there are 136 military tech start-ups in India including Newspace Research and Technologies, Tata Advanced Systems, among others.
Venture Catalysts, which has already invested in companies like Garuda Aerospace, Redwing, Skye Air, Tech Eagle, and Nxtqube, among others, said they are committed to increasing their investments in the defence sector in the coming years.
Apoorva Ranjan Sharma, Co-Founder and MD of Venture Catalysts, said the government must equip itself with the latest technologies, as modern warfare is now fought strategically with advanced technology rather than just physically.
"This includes a reliance on public-private partnerships to develop high-quality weapon systems, encompassing cybersecurity, satellite communication, drone technology, and indigenously developed high-tech weapon systems," Sharma said.
Currently, India imports a major chunk of its weapons and sensors.
"Mostly, it's a seller's market, so the margins (due to high R&D costs and a limited market) are 1000% and more. Just imagine the potential if we could make them in India and export the related technologies—even in parts," says, Navneet Kaushik, founder & managing partner at Jamwant Ventures.
Defence tech sector was once dominated by the PSUs, but it is now witnessing the entry of many deep tech and IP heavy start-ups. They are building hi-tech solutions in areas like AI, drones, robotics, and cybersecurity – all linked to national security, said Sridhar Parthsarthy Co-founder Bluehill VC.
Recently, Bluehill VC led a $1-million round in defence tech start-up Zebu.
According to Parthsarthy, such IP-led deep tech plays are well-aligned with VCs' investment approaches as they provide long-term upside.
From a VC lens, initiatives like iDEX (provides grants of up to Rs 10 crore for developing innovative technologies) offer a strong pipeline of early-stage defence tech start-ups.
"If solutions have dual-use, it is even better — the commercial potential grows, and risks are reduced. But challenges remain -- long sales cycles, regulatory complexity, and bureaucratic hurdles," he added.
