Tokyo-headquartered venture capital fund UTEC (University of Tokyo Edge Capital) has been investing in deep tech startups since 2004. It started looking at India and Southeast Asia markets in 2018 after it raised USD 250 million for its fourth fund.
With USD 550 million of assets under its management, UTEC has backed 110 companies in Japan, the US, the UK, India, and Singapore. Of these, 13 of its portfolio companies have gone public, including three unicorn IPOs on the Tokyo Stock Exchange, and one unicorn IPO on the Nasdaq.
We spoke with Kiran Mysore, principal at UTEC, who manages Indian and Southeast Asian investments for the firm. Mysore, who hails from the Southern part of India, is an artificial intelligence researcher turned VC.
Currently, he manages six portfolio companies. Three are in India, two are in Singapore, and one is in the US.
The following interview has been edited for clarity and brevity.
KrASIA (Kr): What drew UTEC to India?
Kiran Mysore (KM): We started investing outside of Japan when we raised the third fund in 2013. From 2014 to 2017, we invested a bit in the US. But starting with our fourth fund in 2018, we made a shift to Asia. In the last three and a half years, we have invested in about ten companies in the India-Singapore corridor.
We usually land on seed to Series A companies with an initial investment of USD 2–4 million, with a follow-on of up to USD 10 million. As of now, we have invested USD 25 million in Indian companies. India is the only emerging economy with deep tech innovation that can parallel Silicon Valley.
India’s B2B market is not small and is slowly growing, so Indian companies don’t have to go global from day one. The Indian startup ecosystems also have some elements of Israel’s, in the sense that, like Israeli startups, Indian companies always have global aspirations. The only difference is Israeli companies go global from day one, Indian startups go global from day two.
Indian B2B companies first build their product in India, make it robust, and then ship it to other markets. If the company is in the software-as-a-service sector, it will go in the US. If it’s a deep tech company in healthcare and other sectors, they would expand to Southeast Asia, Africa, the Middle East, and potentially Japan as well.
Kr: What are the qualities that you seek in deep tech startups?
KM: We look at companies with defensible science and technology products that can form a strong, competitive moat.
A lot of people talk about the product-market fit, which is important, but we think deep tech startups need to add one more layer. We have internally termed it as the “pain-technology fit.” It seeks answers to three main questions: what is the customer’s pain? Will the technology help? And is this technology the right solution?
Beyond that, we look for a strong team that has at least one founder who has deep domain expertise, another with an inclination in sales, and lastly, their ability to solve global issues for human kind.
Kr: What are some of the interesting deep tech innovations happening in India?
KM: I see two types of deep tech innovations in India. The first set of innovation is in science-led startups. This is based on fundamental research and often originates from academic labs of universities or researchers who have worked in R&D departments of large corporates for several years. They push the boundaries of science, and can be categorized as new discoveries.
UTEC portfolio company Bugworks is a great example of this. Bugworks has platform technology combining medicinal chemistry, structural biology, and computational modelling that has given rise to multiple drug assets to tackle the global problem of AMR (antimicrobial resistance).
Another example is The ePlane Company [not a UTEC portfolio company], which is building flying taxis. The startup was incubated at IIT Madras and its work is based on decades of research in aerospace by Dr. Satya Chakravarthy, a professor at IIT Madras.
The second type of innovative solutions are engineering-led. They combine elements of engineering, design, software, mathematics, and other fields to make the product work in the real world.
UTEC portfolio company Tricog falls in this bucket. Tricog offers AI-driven analysis of ECGs (electrocardiogram) and echocardiograms to diagnose heart diseases in over 12 countries, touching 5 million patients. They combine the domain expertise of Dr. Charit Bhograj, CEO of Tricog, with the engineering expertise of the technical founders, Dr. Zainul Charbiwala and Dr. Udayan Dasgupta, in deep learning and embedded systems.
UTEC another portfolio Agara AI uses deep learning to build fully autonomous voice agents for customer support.
The thing I like about Indian deep tech startups, whether they are science-led or engineering-led, is that they are problem-first, and combine technology with operational excellence.
Kr: Unlike consumer tech startups, deep tech startups don’t receive investment at the idea stage. Do you see this as an opportunity for UTEC?
KM: That is a correct assessment. We realized it’s very difficult for us to sit in Japan and assess idea-stage deep tech startups in India. This is why we partnered with an Indian fund, Blume Ventures, as an LP and launched an accelerator program. Through this accelerator, we have invested in five to six early-stage deep tech companies. One of the companies, Agara AI, has scaled up phenomenally, and we led their Series A investment.
Kr: What are the challenges for Indian deep tech, and what is your outlook for this space?
KM: One of the key challenges in India for deep tech is exits. I think the Innovators Growth Platform [which simplifies the listing and fundraising process of some tech-focused companies] could improve IPO-related opportunities.
The second challenge is in the ease of doing business for companies that create and own proprietary technology and focus on acquiring IP to grow. We hope that there will be a standardization of the process. We would like to see a standardization of IP process, like when a university-led company has to take IP from the university and establish a standalone startup.
Thirdly, the follow-on capital for deep tech companies is always a challenge. We have been helping deep tech companies, even ones in India, to raise funding from Japanese global investors after we invest.
We would like to see more Indian corporates collaborate with [deep tech] startups, both as clients and investors.
Kr: Do you also have partnerships in Southeast Asia like you do with Blume in India?
KM: Currently, we collaborate with the National University of Singapore and A*STAR [Agency for Science, Technology, and Research]. We have good collaborations with Singaporean investors like SGInnovate, iGlobe, and EDBI. But we haven’t become an LP in any of them.
With Blume, we have an LP partnership. But in Singapore, our formal partnership has been with universities.
Kr: What are the similarities or differences between Indian and Southeast Asian startups, particularly in terms of how they operate and the founders’ mindsets?
KM: The two key differences are that while Indian startups have access to better talent, Southeast Asian startups, especially Singaporean deep tech startups, have a better regulatory sandbox to operate in.
The modus operandi for most Singaporean deep tech companies is to use the regulatory sandbox created by the government to build a proof of concept and immediately expand to the US. However, Indian startups tend to take some time building the product for the Indian market, make the product robust, and then expand to global markets.
Both have their own advantages. The end outcomes are great for both, but the paths are different. For example, it is very hard for a Singaporean deep tech company in a B2B tech space to expand to other Southeast Asian or African markets.
Singaporean deep tech companies usually expand only to developed countries. Most Singaporean deep tech companies build for the top 1 to 2 billion people in the world, but Indian deep tech startups are really good at building for the bottom 4 or 5 billion people in the world.