Indian deep tech startups turning hot target for acquisitions

Several Indian deep tech startups are getting acquired by larger global companies to gain access to niche technologies and quality talent, indicating a strong demand for startups focusing on disruptive technologies that can solve complex global problems.

Earlier this year, KPIT Technologies Ltd announced the signing of a definitive agreement to acquire a controlling stake in Bengaluru-based PathPartner Technology for about Rs 191 crore.  The latter is a specialist in providing product engineering services to customers across automotive, consumer electronics, broadcast, medical and IoT domains. It has an offshore research facility in California as well as presence in Germany and Japan.  

In May, General Atlantic-owned KFin Technologies, a Hyderabad-based registry services firm, acquired a 17% stake in insurtech startup Artivatic.ai for an undisclosed sum. The acquirer also has an option to increase its stake to majority holding in Artivatic.ai. The investment is expected to help KFintech venture into insurance tech as it looks to diversify its offerings.  

In September, US-based cloud video surveillance firm Eagle Eye Networks acquired Bengaluru-based AI startup Uncanny Vision to strengthen its capabilities in providing AI and analytics. Uncanny Vision’s deep learning algorithms enable recognition, identification, and prediction to improve business operations, customer service, and site safety. 

A month later, Accenture entered into an agreement to acquire BRIDGEi2i, an AI and analytics firm based in Bengaluru. The acquisition is expected to add about 800 tech professionals to Accenture’s Applied Intelligence practice, helping in strengthening its global capabilities in data science, ML, and AI-based insights.    

Deep tech startups refer to those whose business model is based on high tech innovation in engineering or significant scientific advances. According to Nasscom, India had about 2,100 deep tech startups as of 2020.

To be sure, Nasscom launched the second edition of its deep tech mentoring program called Deep Tech Club (DTC) 2.0 earlier this year. The initiative aims to nurture and promote Indian deep tech startups, and discover disruptive startups enabled by artificial intelligence (AI), machine learning (ML), augmented reality, virtual reality, internet of things (IoT), robotics, blockchain, natural language processing (NLP), and similar technologies.

Deep tech companies are getting acquired for two possible reasons, according to industry experts and investors. “One is, large companies may want to fill certain technology gaps in their portfolio. The other reason is, a very good tech team of a startup may be working on the wrong problem. So, that startup might get aqui-hired to bolster their tech talent,” said Vinay Bansal, founder and CEO, Inflection Point Ventures, an angel investment firm.  

Huddle, an accelerator and fund for early-stage ventures concurs with the view. “Many large companies look to acquire niche deep tech startups to gain access to a technology stack that they may not be able to build on their own as many of them may not be digital natives. Often, such acquisitions also offer quality talent at an affordable cost,” said Sanil Sachar, founding partner at Huddle.

Kishor Patil, CEO of KPIT Technologies, for instance, says his company acquired PathPartner because it realised that the latter’s "competence in the operating system software and low-level software and existing semiconductor partnerships for early access to platforms is key to delivering complex production programs. "Together, we (KPIT Technologies and PathPartner) can offer differentiated offerings for new-age vehicle architectures and strengthen our software integration expertise,” he added.

Likewise, one of Huddle's portfolio, NeuroPixel.AI, a deep-tech AI/ML startup, has already seen large companies showing interest in their solutions and potential partnerships, according to Ishaan Khosla, founding partner at Huddle.

Interestingly, many of these startups get acquired in their early stages when majority of the fundamental suite of technologies are built. Khosla concluded, “Larger companies, that are not traditionally tech-first, look to acquire or partner with these deep-tech firms to access technology or talent.”