No Irrational Valuation Rush In Deeptech, Quality Opportunities Emerging: Piper Serica Director

India's deeptech startup ecosystem is not showing signs of valuation "irrationality" or a funding frenzy, and valuations remain grounded even as high-quality investment opportunities emerge, according to investment firm Piper Serica's Director Ajay Modi.

Global capital is only gradually flowing into the deeptech ecosystem, while geopolitical uncertainty has kept excess liquidity from chasing risk assets, he said.

"In the deeptech ecosystem that we are talking about today, we do not have that irrationality kicking-in yet because global capital is (only) slowly and steadily finding its way into that ecosystem," he told PTI.

The Piper Serica senior executive was responding to a question on the sharp valuation corrections seen in parts of India's startup ecosystem. Last week, UpGrad completed its acquisition of Unacademy for just over $200 million, valuing the edtech startup at about 94% below its peak valuation of $3.44 billion in 2021 - a stark illustration of the reset in startup valuations from the funding boom years.

Deep tech encompasses technologies rooted in fundamental scientific research and advanced engineering, typically aimed at solving complex, real-world challenges. Rather than offering incremental improvements to existing products or processes, these innovations hold the promise to reshape entire industries and create new markets or ways of operating.

Many of the technologies now regarded as commonplace - from electricity to telephones and automobiles - started as breakthroughs at the cutting-edge of science and engineering.

Piper Serica's Modi noted that the investment firm is encountering deeptech founders who have already spent considerable time building technologies and achieving early commercialisation, without the "term-sheet shopping" or "valuation shopping" that can typically accompany overheated funding markets.

"We see very high quality opportunities, high-quality founders who have built something meaningful already...founders who have done the hard work of building satellite technology, launch vehicles, propulsion systems in spacetech, or in semiconductors, in life sciences and drug discovery. We keep coming across these founders who have already done the hard work of building technology and taking it to some form of early commercialisation," he said.

Modi, however, cautioned that another cycle of irrational valuations may emerge a few years down-the-line as companies scale up and global funding taps reopen, once again.

"I think that is when we may go through another cycle of irrational valuations, but fortunately those do not exist right now as we speak," he said.

Piper Serica new Bharat Tech Fund, a Category II AIF, targeting a corpus of ₹600 crore, alongside a greenshoe option of ₹200 crore, has already raised about ₹400 crore and evaluated around 30-35 startups in the hunt for the next investment.

Armed with its fresh investment war chest, Piper Serica expects to deploy ₹180-220 crore across 4-6 deep-tech startups this fiscal, as it scouts opportunities in areas like space technology, semiconductors, advanced electronics, energy and life sciences.