Deep-tech startups become hot targets for global companies

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BENGALURU: Several deep-tech startups in India are being acquired by larger global companies to access niche technologies and quality talent, indicating strong demand for startups that focus on disruptive technologies that can solve complex global problems.

In June, KPIT Technologies Ltd announced the signing of a definitive pact to purchase a controlling stake in Bengaluru-based PathPartner Technology for approximately ₹ 191 crore. The latter is a specialist in providing product engineering services to customers in the automotive, consumer electronics, broadcast, medical and IoT industries. PathPartner has an offshore research facility in California as well as a presence in Germany and Japan.

In May, KFin Technologies, a Hyderabad-based recording services company owned by General Atlantic, acquired a 17% stake in the insurtech startup Artivatic.ai for an undisclosed sum. The buyer also has an option to increase their stake in the majority stake in Artivatic.ai. The investment is expected to help KFintech venture into insurance technology as it seeks to diversify its offering.

In September, US-based cloud video surveillance company Eagle Eye Networks acquired Uncanny Vision, the Bengaluru-based artificial intelligence startup, to enhance its artificial intelligence (AI) and analytics capabilities. Its deep learning algorithms enable recognition, identification and prediction to improve business operations, customer service and site security.

A month later, Accenture agreed to purchase BRIDGEi2i, an artificial intelligence and analytics company based in Bengaluru. The agreement is expected to add approximately 800 technology professionals to Accenture’s Applied Intelligence practice, strengthening its global capabilities in data science, machine learning and artificial intelligence-based insights.

Deep-tech startups are those whose business models are based on high-tech innovation in engineering or significant scientific advancements. India had around 2,100 deep-tech startups as of 2020, according to industry body Nasscom.

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 cultivate and promote Indian deep-tech startups and discover disruptive startups enabled by AI, ML, augmented reality, virtual reality, Internet of Things (IoT), robotics, blockchain, natural language processing (NLP) and technologies similar.

Deep-tech companies are increasingly being targeted for acquisitions for two possible reasons, industry pundits and investors said. “One is that large companies may want to fill some technology gaps in their portfolios. The other reason is that a great tech team at a startup might be working on the wrong problem. So, that startup could be hired to bolster its tech talent, ”said Vinay Bansal, founder and CEO of Inflection Point Ventures, an angelic investment firm.

Huddle, an accelerator and fund for early stage initiatives, agrees with the opinion. “Many large companies seek to acquire niche deep-tech startups to access 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, Huddle’s founding partner.

Kishor Patil, CEO of KPIT Technologies, said his company acquired PathPartner because it realized the latter’s expertise in operating system software and low-level software and existing semiconductor partnerships for access anticipation to platforms is critical to delivering complex production schedules. “Together, we (KPIT Technologies and PathPartner) can offer differentiated offerings for next-generation vehicle architectures and strengthen our experience in software integration,” he added.

Likewise, one of Huddle’s portfolios, NeuroPixel.AI, a deep-tech AI / ML startup, has already seen large companies show interest in their solutions and potential partnerships, said Ishaan Khosla, Huddle’s founding partner.

Interestingly, many of these startups are acquired in their early stages when most of the core suite of technologies is built. Khosla concluded: “Larger companies, which are not traditionally tech-first, seek to acquire or partner with these deep-tech companies to access technology or talent.”

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