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Beyond the Funding Winter: 2023 for Start-ups in the Indian Industrial & Manufacturing Sector
Beyond the Funding Winter: 2023 for Start-ups in the Indian Industrial & Manufacturing Sector

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In my previous blog, we saw how start-ups in the Indian Supply Chain Management & Logistics sector managed to stand strong amidst the funding winter of 2023. This was one of the three sectors which demonstrated resiliency in a year marked by strong headwinds. The second sector which stood out was Industrial & Manufacturing (I&M). Despite an overall decline in start-up funding across all sectors, startups within this domain also showcased resilience and outperformed many of their counterparts, with respect to its share of funding in the overall startup landscape.

% Share of Industrial & Manufacturing in Total Funding Amount

Source: nasscom-Zinnov Weathering The Challenges: The Indian Tech Start-Up Landscape Report 2023

A noteworthy trend in the sector’s funding picture in 2023 was around the dominance of DeepTech startups. These companies, leveraging cutting-edge technologies like AI, big data & analytics, and blockchain among others, emerged as the torchbearers of innovation within the sector. According to a nasscom-Zinnov report launched in January 2024, Indian I&M sector registered a 2.5X increase in funding share attributable to deeptech-infused solutions. Moreover, 73% of the funding in the sector was raised by deeptech start-ups. The success of these start-ups in securing substantial funding points towards a growing recognition of the pivotal role deeptechcan play in reshaping traditional industries.

The transformation of the Indian I&M sector is not just attributable to the growth of deeptech, as even non-deeptech start-ups are playing a key role in driving the digitization of the entire value chain. These startups are not just introducing incremental improvements but are fundamentally revolutionizing processes, from design and prototyping to manufacturing and QC.

Source: nasscom-Zinnov Weathering The Challenges: The Indian Tech Start-Up Landscape Report 2023

The infusion of technology is enhancing efficiency, reducing costs, and opening up new possibilities for growth within an industry traditionally characterized by its resistance to change. As a result, established industrial players are recognizing the need to embrace innovation and are actively engaging with startups to stay ahead in the competitive landscape. Even the government is offering amultifaceted support, i.e. both directly and indirectly, to fuel the sector's growth. Some notable government interventions include:

  • National Manufacturing Policy (NMP) aims at improving the Indian Manufacturing sector to contribute 25% to India’s GDP by 2025.
  • SAMARTH Udyog Bharat 4.0 has been launched by the government to leverage Industry 4.0 to enhance the competitiveness of the Indian capital goods sector
  • Make in India and Aatmanirbhar Bharat are catalysts to the NMP target for the Indian manufacturing sector.

The government's strategic focus on the I&M sector is a reflection of its recognition of the sector's pivotal role in driving economic growth and job creation. By aligning policies and initiatives with the specific needs of this sector, the government is working towards creating an environment where startups can flourish, contributing not only to their individual success but also to the sector's overall growth.As we look closely into this picture, it becomes evident that in the pursuit of innovation, a sector often considered traditional can emerge as anexample of resilience, demonstrating the power of adaptation, collaboration, and visionary policymaking.

 


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Dhiraj Sharma
Principal Analyst

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