Deep Tech: “Deep tech has expanded and there are new areas where we can develop”: Arjun Rao

Chennai-based Speciale Invest is a go-to venture capital firm for startup founders. deep technology and space. Investing in these types of companies is not easy, as it requires a deep understanding of the sciences and a long-term investment horizon. Some of the companies it has invested in, such as CynLr, Ultraviolette and Agnikul, are moving into the monetization stage, and Speciale Invest is looking for the next big thing, he says. Arjun Raopartner at Speciale Invest, in an interview with ET. Edited excerpts:

When you started, there was little institutional money for high-tech in India. Things have changed. Has your approach changed as well?

Our initial thesis was that there is talent in the country to develop deep tech. From the demand side, there are enough problems to solve, which will require deep tech. technology companies that will be built over the next decade and beyond.

The definition of deep tech has evolved. Before, there were electric vehicles, space technologysoftware, infrastructure, cloud, data, AI. Now, deep tech has expanded. There are new areas where we can develop. We have a first-mover advantage, but the challenge is to maintain that advantage. Academia has become a very important source of research ideas, which leads to the creation of products and their commercialization.

So the time spent in academia as a source of deal flow is a fundamental change. Another is that great founders tend to come from R&D teams at very good tech companies, both multinational and national. We constantly think about which company we should look for talent.

What new areas are you excited about?

One of them is the broad spectrum of life sciences and biotechnology. We are looking closely at two subcategories. The first is drug development. Systems, processes, tools, data, AI, preclinical stages, experimentation, postclinical stages – there is a lot of scope for innovation across that spectrum. Then there is the non-human side, the synthetic biology side – things that can be created through fermentation processes and protein synthesis in the lab. Think dyes, clothing materials, nutraceuticals, cosmetic ingredients, biofuels. Semiconductors They are another sector that interests us.

Surely not the manufacturing side?

You are absolutely right. Everything will start with design and development: new intellectual property, new architecture, new chips, new chip systems for specific applications, etc. The talent we have in the country in design and development is very large, thanks to the presence of chip companies that have been in the market for 30 years. That is the main reason why we are optimistic about semiconductors.

The second reason is that the Chinese perspective has created a need for us in India to be more self-reliant. With the AI ​​wave, the computing wave and training and inference in LLMs and SLMs, there is an immense demand for better AI chipsAs for manufacturing, we will have to leave it to traditional operators with large capital spending capacity or to the government.

What are the other evolving areas of interest?

We need to look beyond electric vehicles. We need to think about innovation at a more fundamental level: new types of cells in terms of chemistry, design and architecture. We also need to consider the supply chain constraints for certain minerals and rare earth metals. What kind of chemistry will work, what kind of cells will work, and will the economics work?

There are also things to be done in terms of industrial carbon capture and sequestration. Progress is being made in Europe and in parts of the United States. We are a growing nation and there will be significant greenhouse gas emissions in the coming decades.

So we need to have solutions that help make it more sustainable, where we can capture the greenhouse gases and carbon emitted and turn them into something useful.

Do you see much development in the broader area of ​​quantum, both in terms of computation and applications, for example in terms of encryption?

It’s an important sector from an application perspective and from a basic computing perspective. There are opportunities in applications like communications encryption and data encryption. There are also opportunities in enabling the middle layer and the application layer. The early adopters of some of these technologies, because they are so advanced and the risk is also higher, are government and defense. I think enterprises are starting to pay attention.

It’s a combination of the product becoming more robust and cost effective. We’ve invested in QNu labs for data security and communications security. A couple more labs are starting to emerge. We’re spending time on the middle layer and application layer of quantum applications based on quantum computing. I think the government is realizing this and there is a quantum policy, which is a good sign. The pace is not in our control. Sometimes you have to be patient in these areas.

Some of the companies you have invested in are already ready to bring their products to market. How does your role change at this point in the companies’ life cycle?

Our relationship with them, our knowledge and our proximity to them are arguably some of our advantages. Growing from a small, R&D-focused company, other aspects of your organization become super-critical. How do you bring high-quality talent into the organization? You may have been a 20-30 person company up until this stage, but now you may need to move to 300.
and beyond in a short space of time.

So you need to think about the organisational structure, processes, discipline, etc., while remaining agile and giving them access to key advisory networks. You have to mature in that respect, but keep the innovative core. For us, another important thing is to be aware of global benchmarks and what the best companies in the world have done well, so that we can pass on information to them.

Most of them are led by first-time entrepreneurs who have not necessarily gone through these cycles, so we are playing a supporting role. One of the key aspects remains: can we support them so that they have access to more capital?

Are you going to take out another fund?

We are still using our second fund and there are a few more companies we will use it on. We may consider a third fund sometime in 2025.