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How to attract investments in semiconductor ecosystem from VCs
How to attract investments in semiconductor ecosystem from VCs

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Insights based on fireside chat at SemiconIndia: FutureDesign Roadshow @ IISc Bangalore

The evolution of startups in India has faced an interesting journey. While in the 90s, it was primarily services-based startups, in the last 10-15 years, it evolved to consumption-based startups, and in decade it is more innovation-based startups.

The question that is often pondered over by the start-up as well as the engineering community is whether there would be an emergence of a unicorn from the semiconductor industry.

Many VCs exist and invest in DLI and other start-ups, and they differ from traditional VCs in a multitude of ways.

  1. Patient capital – For a semiconductor design company, it takes upto 2-3 years before the first product is out and requires higher investment than a traditional aggregator company. VC in semiconductor space would bring in capital and not rush for immediate returns as they are aware of the overall timelines and cycles.  
  2. Shrinking the design cycle – MNC Companies like Western Digital have integrator experience across the value chain, from the wafer to the end product, from design to manufacturing. In addition to the funding, MNCs also have a team who provide expertise and hence help in reducing the design cycle through the experience of fundamental and applied research.
  3. Connections – MNC VCs in the semiconductor industry bring connections from customers who help semiconductor startups to help define their product, to the assemblers and founder who help in design the chip and product in a more cost effective manner, the supplier who can provide the materials, and the overall expertise to move forward effectively.

An MNC VC like that of Western Digital, for example, has been able to prove that.

Others like Bharat Innovation Fund are focused on investing in deep tech, core tech, IP driven companies based in in India for global companies, including deep science which includes new materials, biotech,; affordable hard-tech; software development in AI, ML, Web3; platforms replicating the reach of India-stack in the semiconductor space.

While there is a large presence of VCs who are interested in investing semiconductor start-ups, however the start-ups need to keep several key points in mind to attract that investment and this includes -

  1. Know your customer – Customer may change during the journey of the start-up, but the start-ups must know who their customer is, and why would they be interested. Commercial validation is very important.
  1. Team – Teams should have complimentary skills – across technology domain, commercial, practical experience. Diversity in the team, with women founders, also boost the profile.
  2. Capital efficiency – Thematic start-ups including Electric vehicles, other diversified ideas which solve niche customer problems are also explored by VCs aggressively.

VCs are witnessing high potential across sectors such as electric vehicles, AI and ML in semiconductor, VLSI, battery technologies, IC design, climate tech and sustainability, energy tech etc.

While the opportunities are immense with the presence of world-class talent, however, presence of resilient entrepreneurs with ideas solving crucial customer problems in a large country like ours are bound to find takers and the success of the India stack has been a testament to that.


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Vandhna Babu
Principal Analyst - Research

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