Speciale Invest Closes Fund III At INR 600 Cr To Back Deeptech Startups

Deeptech-focussed VC firm Speciale Invest has announced the close of its third fund at INR 600 Cr (about $70 Mn). The oversubscribed fund initially had a primary corpus of INR 500 Cr.

The VC firm said that the fund’s final close will be formalised by next month with the addition of a few strategic limited partners (LPs). The Fund III is backed by a “strong base” of returning LPs, including family offices, institutions, and strategic investors.

Speciale Invest said the Fund III will invest in 18 to 20 pre-seed and seed stage startups over the course of next four years with an average ticket size of INR 7 Cr to INR 10 Cr.

The fund will back ventures across sectors such as spacetech, advanced manufacturing, AI infrastructure, semiconductors, climate tech, computational biology, dual-use defence tech, quantum systems, energy storage and healthtech.

The VC firm said that half of the Fund III will be reserved for follow-on investments.

“We will start making investments immediately. For this fund, domestic HNIs, ultra HNIs and family offices form the biggest chunk of LPs. There are some small institutions and strategic players as well. However, the majority is domestic capital,” Arjun Rao, partner at the VC firm, told Inc42.

Building India’s Sovereign Tech Stack

Speciale Invest also elaborated on the Fund III’s investment thesis:

• Prioritising startups that are solving for India’s strategic autonomy in sectors like space, dual-use defense, energy, semiconductors, and climate resilience
• Back startups that comply with global certification standards early in their journey
• Moving beyond equity to help founders avail blended financing (debt, grants, strategic capital) for scaling up operations
• Incubating capital-efficient startups, which have founder-market fit, “market timing” and technical defensibility
• Build and scale intellectual property in India and take it to international markets such as the US, Europe and Southeast Asia

Founded in 2017 by Vishesh Rajaram and Rao, Speciale Invest backs seed stage deeptech startups. The VC firm counts the likes of Agnikul Cosmos, The ePlane Company, GalaxEye, QNu Labs, Fermbox and InspeCity in its portfolio.

While the Chennai-based VC firm’s maiden fund, launched in 2017, had a corpus of INR 60 Cr, its second fund, launched in 2021, had a total outlay of INR 300 Cr. In 2023, it also launched an INR 185 Cr growth fund to participate in follow-on rounds of its existing portfolio companies.

Speciale Invest has so far secured nine exits via mergers and acquisitions.

India’s Deeptech Conundrum

Despite healthy headway made in the past few years, India’s deeptech ambitions still face a slew of challenges, including inadequate funding, lack of patient capital, regulatory hurdles, and difficulties in commercialising research. There is also the ongoing struggle of retaining high-quality talent within the country.

Flagging this issue, commerce minister Piyush Goyal, earlier this year, said that “numbers” from the country’s deeptech space were “disturbing”. He urged founders to skip ‘dukaandari’ (shopkeeping) and focus on competing globally with innovations.

Investors often shy away from investing in deeptech startups due to high gestation period and high risks involved with the sector.

However, the Centre’s 1 Lakh Cr R&D fund is expected to give a push to the country’s deeptech ecosystem. Meanwhile, a few VC firms have also started backing deeptech startups. For instance, Yali Capital recently closed its INR 893 Cr deeptech-focussed fund. Last year, growX also launched its second fund to back 20-24 early stage deeptech startups.

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