3one4 Capital to ramp up deep tech investments without committing separate fund

Early-stage venture capital firm 3one4 Capital is planning to ramp up deep tech investments in India, apart from the 13 existing startups it has already invested in. However, the firm has no immediate plans to create a deep tech sector specific fund for now.

“We want to remain a multi-sector fund, but for us, deep tech keeps becoming a more and more prominent theme every year,” Pranav Pai, chief investment officer at 3one4 Capital, told Mint in an interview.

3one4 Capital has invested in deep tech startups across sectors including semiconductors, aerial mobility, AI-assisted healthcare, materials engineering, synthetic biology and autonomous UAVs.

The firm currently manages around $570 million of committed capital and has a combined portfolio of over 100 startups across the early-stage.

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Some of these companies include The ePlane Co, an electric air taxi company; Agnit, a company that both designs and fabricates semiconductors; Dozee which uses AI to power patient monitoring systems and Exponent which manufactures fast charging batteries as well as builds smart charging infrastructure. 

Agnit, Dozee and Exponent are 3one4 Capital’s most successful deeptech investments so far. 

“If we apply deep tech in the right areas in the right time, we have a magnificent opportunity to use the technology to leapfrog to the cutting edge of technology adoption. That becomes something VCs are going to be interested to invest in,” Pai said.

As deep tech becomes a larger focus area for VCs, the startup ecosystem is changing as well. Part of that can be attributed to the government’s decision to boost the deep tech sector. In this year’s Budget, the government renewed its ₹10,000 crore allocation to the startup Fund of Funds. 

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Additionally, the government allocated ₹20,000 crore to drive private sector research and development as part of an initiative announced in the July Budget. A deep tech fund is being considered as a part of the initiative.

Entry of bigger VCs 

Larger VC firms like Peak XV, Accel Partners and Blume Ventures have picked up on the trend and have been making investments in the sector for a while. Sarvam.ai, which is building foundational large language models for India, raised $41 million in 2023 from Peak XV, Lightspeed Venture Partners and Khosla Ventures. Similarly, Ethereal Machines, which builds 5 axis CNC milling and 3D printing machines raised $23 million in 2018 in funding from Blume Ventures as well as Peak XV.

Currently, there are 5,605 Indian startups in the deep tech space in India, according to Tracxn. The sector has cumulatively raised $8.39 billion in equity funding. 

Read this | Funding, market framework for deep-tech startups in two months

Investment in the sector was minor until 2018, jumping from $209 million that year to $555 million. It dropped to $497 million in 2020 before doubling to $1.2 billion in 2021. Funding to the sector peaked in 2022, accumulating $2.77 billion before dropping to $1.1 billion in 2023, according to Tracxn data. 

Funding for deep tech startups dropped below the billion-dollar mark to $990.6 million in in 2024. So far this year, the sector has raised $124.5 million.

Startup report 

Keeping in line with the investment trends in the sector and the shift in India’s startup ecosystem, 3one4 Capital released a report titled, “Frontier Tech 2025: Beyond Tomorrow,” outlining 16 areas in the deep tech sector where Indian startups can develop IP-led innovation that can be commercialised.

These 16 areas include quantum computing, AI in cybersecurity, defence and border logistics, AI-optimised supply chains, brain-machine interfaces, low-carbon solutions and industrial scale 3D printing. The 13 deep tech startups in 3one4 Capital’s portfolio are part of nine of the 16 areas of interest mentioned in the report.

And read | Mint Primer: Govt’s ₹1-trillion deep tech fund: why we need it, and is it enough?

“We’re constantly looking at companies in these untapped areas. If we see the right team with the right business model and it is at the right phase of commercialisation, we are happy to invest,” Pai said.