Consumer Tech and Deeptech Innovation: A Critical Debate in India’s Startup Ecosystem

 Consumer Tech and Deeptech Innovation: A Critical Debate in India’s Startup Ecosystem

In recent discussions surrounding India’s startup ecosystem, Union Minister Piyush Goyal’s remarks about the country’s innovation landscape have sparked a lively debate. Goyal, speaking at the second edition of the Startup Mahakumbh event, emphasized that Indian startups should focus on deeptech innovation rather than just consumer tech. His comments, which advocated for a shift towards cutting-edge sectors like semiconductors, robotics, and electric vehicles (EVs), have drawn strong reactions from several startup founders and investors. They believe that consumer tech is an essential driver of innovation and wealth creation in the country, and that the government should play a more active role in supporting this sector.

This debate has opened up broader discussions about the future of India’s technological advancements, the role of consumer internet companies in driving economic growth, and the kind of support that the government needs to provide to nurture both deeptech and consumer tech ventures.

The Role of Consumer Tech Startups in Driving Innovation

A key response to Goyal's criticism came from Aadit Palicha, the co-founder and CEO of Zepto, a rapid grocery delivery platform. In a LinkedIn post, Palicha pointed out that much of the technology-driven innovation over the past two decades has originated from consumer internet startups. He questioned why India lacks its own foundational AI models, arguing that it’s because the country still hasn’t built large-scale internet companies. According to Palicha, companies in sectors like quick commerce, food delivery, and e-commerce have been instrumental in shaping the technological landscape of the country.

Many technology innovations have not only stemmed from these companies, but they’ve also laid the foundation for India’s potential in future industries like deeptech. By pushing the boundaries of what’s possible in the consumer tech sector, these companies have made it easier for investors to fund groundbreaking ideas in more advanced sectors.

Rajeev Mantri, the founder and managing partner of Navam Capital, echoed similar sentiments, pointing out that consumer tech should not be downplayed in favor of deeptech. Mantri emphasized that consumer tech companies have not only created jobs and wealth but have also led to the creation of local champions. These local giants, such as Flipkart, Zomato, and Swiggy, have proven to be profitable and capable of generating billions in free cash flow. These successes, in turn, have created fertile ground for investment in frontier technologies, including deeptech.

Many in the startup ecosystem argue that India needs to develop strong local champions in the internet space before it can make serious headway in sectors like AI, semiconductors, and robotics. Without strong, innovative internet companies, India risks missing out on the opportunity to lead in future technological revolutions.

A Shift in Focus: Deeptech vs. Consumer Tech

Union Minister Piyush Goyal's call for Indian startups to dream bigger and focus on deeptech innovation has been seen as a shift in the country’s entrepreneurial narrative. At the Startup Mahakumbh, he urged founders to go beyond the quick commerce, gaming, and influencer economy sectors that have seen a surge of investment in recent years. He advocated for Indian startups to aspire towards global-scale innovation in high-tech fields such as EVs, robotics, and semiconductors—sectors where countries like China are making significant strides.

However, critics argue that such a shift overlooks the pivotal role that consumer tech plays in India’s innovation ecosystem. While deeptech holds immense potential, it is a highly capital-intensive and long-term undertaking. In contrast, consumer tech offers the possibility for quicker scalability, job creation, and significant wealth generation in the short term.

Furthermore, the idea of leapfrogging directly into deeptech, bypassing consumer tech, may not be a practical approach. Many of the deeptech innovations that Goyal advocates for are built on the foundations laid by consumer internet startups. For instance, advancements in AI, machine learning, and data science—key enablers of deeptech—have been significantly influenced by the data and infrastructure developed by consumer-facing companies.

Learning from China’s Evolution

In his remarks, Goyal made a comparison between Indian and Chinese startups, suggesting that China’s success in areas like EVs, semiconductors, and robotics came after their initial focus on consumer tech, particularly food delivery services. Ashneer Grover, the former managing director of BharatPe, responded to this comparison by pointing out that China’s tech ecosystem had a long history of strong government support and policy interventions that enabled it to make the leap from consumer tech to deeptech.

Grover argued that India should focus on creating an environment conducive to sustained economic growth over the next two decades, similar to the trajectory that China followed. He pointed out that China did not simply jump to deeptech without first nurturing its consumer tech companies, which created a stable economic foundation for the country’s subsequent deeptech successes.

Grover also noted that the public discourse in India needs to shift from nostalgia about the past to a focus on the future, particularly science and technology. He emphasized that Indian entrepreneurs need the freedom to experiment, innovate, and take risks in both consumer tech and deeptech without being bogged down by restrictive policies.

Government’s Role in Supporting Innovation

As the debate over the future of India’s tech ecosystem continues, there is a growing call for government intervention to better support innovation across all sectors, including both consumer tech and deeptech. Rajeev Mantri stressed the need for the government to address the specific challenges faced by deeptech entrepreneurs. This includes providing funding, reducing regulatory barriers, and facilitating a more conducive environment for frontier technologies to flourish.

At the same time, many in the startup community argue that the government should not adopt a dismissive attitude toward consumer tech. Rather than viewing it as a lesser form of innovation, policymakers should recognize the critical role that consumer tech plays in the broader technological landscape.

TV Mohandas Pai, a former Infosys board member and co-founder of Aarin Capital, highlighted several concerns about the government’s approach to startups. In particular, Pai pointed out issues like the angel tax, which has created friction for early-stage startups, and restrictive policies around investments from insurance companies and foreign investors. According to Pai, these policies hinder innovation and discourage investment, particularly in high-risk sectors like deeptech.

Conclusion: A Balanced Approach to Innovation

The ongoing debate between deeptech and consumer tech in India’s startup ecosystem underscores the need for a more balanced and nuanced approach to innovation. While deeptech is undoubtedly an area of immense potential, it is essential to recognize the critical contributions of consumer tech companies in driving economic growth, creating jobs, and laying the groundwork for future innovations.

Instead of pitting these sectors against each other, India’s startup ecosystem would benefit from a more inclusive approach that supports innovation across the board. This requires thoughtful government policies, access to capital, and an environment where both deeptech and consumer tech companies can thrive.

By encouraging the growth of strong consumer tech companies and investing in deeptech, India can position itself as a global leader in both sectors. The key lies in recognizing that innovation can take many forms, and supporting a diverse range of technologies will ultimately lead to a more robust and sustainable startup ecosystem.

In the end, the government’s role should be to create an environment that fosters entrepreneurship in all its forms, ensuring that both consumer tech and deeptech can flourish side by side, driving India’s future technological advancements.