Time For Liftoff? How The VC View On India’s Spacetech Startups Is Changing

Until 2020, Indian spacetech startups were not on the public radar. Space missions were primarily under the purview of the government-run Indian Space Research Organisation (ISRO), and even VC funds did not have a clear view on investing in spacetech.

All that has certainly changed with liberalised policies for spacetech investors, more public-private partnerships between startups and the government as well as the growing talent base for spacetech applications and operations.

Indian startups are today increasingly making waves at much lower costs than their international counterparts, and often with faster execution, underscoring the innovation-first mindset in spacetech in India.

For example, Agnikul Cosmos, a spacetech startup that builds customisable and mobile launch vehicles for space journeys, has found a way to 3D print rocket engines in under a week, as opposed to months.

The likes of Bellatrix – developer and manufacturer of advanced propulsion technologies and Pixxel – provider of hyperspectral earth imaging datasets are few other names that have been driving innovation in the spacetech space.

In 2022, Hyderabad-based Skyroot Aerospace became the first private Indian space company to launch a rocket into space with its Vikram-S rocket series. Such stories are becoming increasingly commonplace in India.

More than 150 spacetech startups have emerged across areas such as launch vehicles, satellite constellations, earth observation, satellite communication, space data analytics and in-space technologies among others leading to a high degree of innovation. To facilitate startup participation, the government established the Indian National Space Promotion and Authorisation Centre (IN-SPACe).

The Indian Space Policy 2023 gave further momentum to the spacetech sector. New Space India Limited (NSIL) has engaged private firms to manufacture its largest launch vehicle, LVM3, which successfully launched missions like Chandrayaan-2 and Chandrayaan-3.

Further, in this year’s budget, finance minister Nirmala Sitharaman announced the government’s intent to establish an INR 1,000 Cr VC fund. Spacetech startups also got a big boost with the 0% GST implementation in 2023.

And with the road opening up, venture capital firms, corporate venture funds and angel investors have swarmed to the spacetech opportunity.

VCs Shoot For Spacetech 

According to data from Inc42, there are currently more than 150 spacetech startups in India catered to by an active VC ecosystem comprising 50+ venture capital funds – both domestic and international.

Prominent Indian VCs backing this new class of startups include pi Ventures, Speciale Invest, Kalaari Capital, Blume Ventures, Peak XV Partners, Lightspeed, Force Ventures, and growX Ventures among others.

While the expanding private space tech startup landscape and ongoing government support present a lucrative opportunity for investors, the presence of VCs is equally vital for the sector’s long-term growth.

Vishesh Rajaram, managing partner at Speciale Invest, underscored the importance of VC investments in the development of the Indian spacetech ecosystem. Despite favourable conditions, the sector still requires substantial capital investment, particularly for upstream technologies that often have longer gestation periods and higher capital expenditure needs.

“In tandem, a robust domestic market—both governmental and private—must emerge for these technologies. Otherwise, startups will struggle to commercialise their innovations, impacting their ability to generate revenue and raise subsequent funding,” Rajaram added.

Do Indian Spacetech Startups Have The Edge?

India’s heritage in spacetech is more than six decades old. This has resulted in a strong talent and advisory pool, educational institutes with the relevant coursework amongst others.

Indian spacetech players are developing faster, more efficient, and cost-effective solutions at scale. A prime example of this is the Mars mission, which was completed on a budget smaller than that of Hollywood space movie Gravity.

“As the Indian spacetech companies continue to innovate, grow and show traction, I see more and more Indian spacetech startups going global as the problem statement is truly ‘universal’,” Laxmikanth V, managing partner, Pavestone Capital told Inc42.

At the same time, the ecosystem offers a very mature supply chain for vendors and manufacturers for space components, acting as a backbone for future growth. Inc42’s 2023 report on spacetech notes some of key MSMEs in this regard such as Ananth, Ajista, Capronic Systems and RMSI among others.

These MSMEs offer services in some of the key areas such as aerospace component manufacturing and testing; satellite component manufacturing and ground station equipment; automated testing equipment; launch vehicle engine manufacturing and assembly and GIS consulting.

As Hemant Mohapatra, partner at Lightspeed India Partners said in an earlier interaction, India has the opportunity to become a space technology partner for the world, given the mindset of building at low cost. “A lot of countries would look at India as their supplier of choice for semiconductors, spacetech, defence tech. For the first few years, this would probably be the ASEAN nations that trust India. It would be followed by friendly Western nations, and then many more countries over a period of time,” Mohapatra said.

AI Fuels Space Applications 

Where there’s innovation, AI cannot be far behind. And within spacetech, AI has a significant role to play when it comes to processing satellite sensor data, imagery and catering to next-gen solutions as spacetech matures.

A prominent example is GalaxEye, which is building a sensor that fuses synthetic aperture radar (SAR) and optical data providing earth observation (EO) data even through cloudy weather or night time for use cases in sectors such as agriculture, marine, defence and insurance. The company has signed a deal with Elon Musk’s SpaceX to launch these EO satellites.

Moreover, startups like InSpace Technologies and Digantara are figuring out solutions for in-space debris management which help maintain the safety of space assets from space debris. Mumbai-based Inspecity is building robotics, sensing and propulsion technologies that can extend the life of satellites in space, thereby increasing the amount of revenue that the satellite operator can make.

The advent of AI is expected to drive and accelerate these innovations not only due to productivity efficiency but also thanks to next-gen data analytics

Rajaram believes that AI will accelerate the design process for space systems and components, as well as optimise mission planning, fuel consumption, time of flight and other critical indicators.

Further, autonomous systems could potentially carry out more complex missions on the moon, Mars and other untouched territories, while improving processing of massive data from space and provide more relevant and accurate insights to scientists and researchers.

However, Pavestone’s Laxmikanth has a slightly different viewpoint here. He emphasises that data analytics is already being used at scale in this industry and it is still early in the hype cycle of AI / ML for its use cases to be established in an industry like spacetech.

“I believe role of AI-ML would not lie in mission critical use-cases where the data must be accurate and not probabilistic. It would rather lie in areas with huge datasets with non-mission critical use cases utilising geospatial data, telemetry data, and more,” he added.

India Spacetech Beyond 2030 

From the launch of India’s first satellite Aryabhata in 1975, to Chandrayaan-3’s historic moon landing, India’s spacetech ecosystem has made significant strides. And now startups are carrying the torch forward.

Despite these achievements, challenges remain.

It would be fair to say that across the Indian spacetech ecosystem, startups are currently in the growth stage, and no one has scaled up enough to hit the late stage and attract mega deals.

While investor interest in spacetech is growing, nearly 74% of investors have made only one deal within the ecosystem. Also, in 2024, no new fund specifically focused on spacetech startups has been launched so far.

This raises an important question: Are Indian VCs ready to increase their investments in spacetech startups with larger funding rounds, given the sector’s need for patient capital?

Roopan Aulakh, managing director at pi Ventures, acknowledges this issue. “In India, the availability of growth capital for spacetech startups remains a challenge. While seed funding is abundant, there are limited options for tech-mature, pre-revenue spacetech startups to secure the necessary capital to scale,” she said.

The potential, however, is undeniable and vast as space itself.

Spacetech is already integral to daily life, from weather forecasts to live television and navigation. Global space spending was recorded around $570 Bn+ in 2023 and is projected to nearly triple to $1.8 Tn by 2035 within the next decade.

For India’s spacetech ecosystem to thrive, it is imperative to drive adoption of space-centric applications by companies on the ground.

Unlike other sectors, spacetech can be a very unforgiving business, because the cost of failure is catastrophic. So it’s also natural that venture capital funds and investors are also playing it safe and still gauging the temperature of the ecosystem, before deploying the big cheques.

Speciale Invest’s Rajaram believes that the government’s INR 1,000 Cr fund is finally backing the talk. “It will make a bunch of other people think about this more seriously as a sector. It also sends a very positive signal internationally for investors to consider participating in the space sector in India.”

India is beginning to see more of such funds investing in deeptech sectors but it will always be a smaller market compared to the consumer market. There cannot be a one-size-fits-all model in a market of this size and magnitude, especially with the global opportunity being more clear in spacetech than in other sectors.

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