Charting the progress of a deep tech startup is, quite literally, rocket science.

Since most deep tech startups push the boundaries of science and engineering are a long way from commercialisation, we often use technology readiness levels—a measurement system developed by NASA to test the maturity level of technology—to map their growth path.

At early stages of technology readiness, traditional investors are often loath to invest in such startups because the science and technology may still not be completely proven and its commercial viability may require further validation. At this point, it is important to have non-dilutive grant capital. Governments, philanthropic entities, as well as the CSR and R&D divisions of corporates could play a major role in filling these gaps.

As technology readiness improves, though, deep tech startups need non-dilutive grants during their initial stages to address the science risk, a mix of equity and grants as they build actual prototypes, and a mix of equity and debt as they scale. 

For example, the early stages of research for the lithium-ion (Li-ion) batteries used in our mobile phones and electric vehicles were completely funded by government grants. However, today, most companies that develop Li-ion technology innovations are funded through equity and debt capital. (The more proven a technology, the less risky. These ventures often prefer debt capital as it is cheaper than equity.)

With the needs of deep tech companies evolving in lock-step with their tech, it is imperative to build an ecosystem of different stakeholders to foster deep tech innovations at every stage of their development. It is crucial to have the proper facilities to spark research and innovations, capital and resources to facilitate lab-to-market transitions, market conditions to scale up wide-scale adoption, and the right regulatory environment to facilitate all those steps. 

On August 1, India took a step in this direction when the office of the Principal Scientific Advisor to the Indian government published the draft National Deep Tech Startup Policy (NDTSP). Intended to facilitate the growth of deep tech startups, it recommended a slew of measures aimed at providing India’s deep tech innovators with capital—both dilutive and non-dilutive—intellectual property protections, infrastructure, supportive regulation, and improved domestic market demand.