Finance Minister Nirmala Sitharaman’s announcement of a Rs 1000 crore venutre capital fund for investments into the space economy has brought in cheer for the space tech companies and venture capitalists planning to invest in this upcoming segment. This initiative aims to significantly boost the country’s space sector, with a goal of expanding it five times in the next 10 years.
It is expected that the fund will encourage innovation and aims to boost research, new ideas, and business development in space technology led by the private sector. This initiative fits into the government’s larger plan to establish India as a key player in the global space industry. More than 180 space technology startups recognised by the government will gain from this initiative. These startups have struggled to find funding, and this fund is designed to help solve that problem. In its pre-budget analysis on expectations from the space segment, THE WEEK had highlighted the challenges which many of such space startups were facing and were looking at a similar fund to boost the sector.
The Indian space economy is projected to grow from its current size of $8.4 billion (Rs 68,000 crore), which is about 2-3 percent of the global space market, to $44 billion (Rs 3,52,000 crore) by 2033. The private sector is expected to play a key role in this growth. Companies will likely take over satellite manufacturing, launch vehicles, satellite services, and ground systems. The government aims to encourage private initiatives to strengthen the space economy.
In 2023, investments in Indian space start-ups rose to $124.7 million (Rs 1,000 crore), reflecting increased interest and confidence in the sector, especially after successful missions by the Indian Space Research Organisation (ISRO) that gained international attention. By 2047, the goal is for India to capture 15 percent of the global space market, as stated by Jitendra Singh, Union Minister of State for Science and Technology.
Interestingly the Economic Survey 2023-24, released yesterday stated that India currently has 55 active space assets. These include communication satellites, navigation satellites, scientific satellites, meteorological satellites, and Earth observation satellites. These assets are important for many uses, such as communication, weather forecasting, and scientific research.
“The growth of the space economy is expected to generate many high-skilled jobs, which will help boost the overall economy. Investing in space technology can lead to benefits in other areas like telecommunications, agriculture, and disaster management, creating even more opportunities. The fund will help develop advanced space technologies, improving India’s abilities in satellite services, communication systems, and space exploration. By promoting innovation and technology, India seeks to strengthen its position in the global space market,” remarked space expert Girish Linganna.
He adds that as part of the larger Rs 1 lakh crore funding pool, this fund will help build important facilities for space research and development. The initiative also includes plans for sustainable growth, making sure that the expansion of the space sector is environmentally friendly.
“The fund is expected to boost teamwork among government agencies, universities, and private companies. This collaboration is essential for successfully carrying out complex space projects. Improving the space sector is important for national security, as it enhances India’s abilities in space-based surveillance and communication. By encouraging innovation, supporting startups, and promoting technological advancements, this initiative aims to make India a key player in the global space industry,” remarked Linganna.
As of January 2024, over 300 Indian organizations have submitted 440 applications to the Indian National Space Promotion and Authorisation Centre (IN-SPACe) for support in different areas of the space sector. Additionally, non-governmental groups have signed 51 memorandums of understanding (MoUs) and 34 plans for joint projects related to space activities.
“The announcement of a 1000 crore VC fund in the Union Budget 2024-25 for the space sector is a groundbreaking development. This fund will provide crucial financial support to innovative startups and companies, enabling them to scale their technologies and contribute to India’s space ambitions. Such a significant investment underscores the government’s commitment to fostering a robust and dynamic space ecosystem. It also aligns with Union Finance Minister Nirmala Sitharaman and the government’s vision of expanding the space economy five fold in the next decade. At Pixxel, we are excited about the opportunities this fund will create to advance space technology and drive economic growth. While we recognise that even larger funds will be needed as the sector grows, this is an excellent start and a vital stepping stone. This initiative marks a significant step forward for India in the global space industry,” remarked Awais Ahmed, founder and CEO, Pixxel.
Companies such as Chennai-based space tech start up company Space Kidz India was anticipating such a fund. “This initiative can act as a boon for early-stage companies, helping to bridge the funding gap in a rapidly growing startup ecosystem. However, the effectiveness of this initiative hinges on how well the funds are managed and dispersed. It is crucial that the government ensures these funds are allocated efficiently and transparently, minimizing bureaucratic hurdles and enabling startups to receive timely support,” said Srimathy Kesan, founder and CEO of Space Kidz India.
She feels that while the announcement of such funds is a positive step, the real challenge lies in the implementation. “A well-structured framework is needed to manage the allocation of funds, ensuring that startups not only receive the necessary financial backing but also benefit from an environment that fosters innovation and retains talent. By prioritising effective management and transparency, the Indian government can create a thriving ecosystem for startups, ultimately driving economic growth and technological advancement in the country. This will also give confidence to the western world to have equity in Indian startups. We need a strong accelerator program that could channelise this fund disbursement,” added Kesan.
Many other space tech company representatives have expressed their joy at this fund. “Wonderful news for all of us in the sector. This will help larger players emerge out of India’s space startup ecosystem. This also shows that the government is continuing to strongly back its vision of making India have a larger chunk of the global space economy,” remarked Srinath Ravichandran, Co-Founder and CEO, Agnikul Cosmos.
Many space tech companies feel that the establishment of the 1000 Crore VC fund addresses a crucial funding gap in nascent space R&D. This initiative will be transformative in building sovereign capabilities, fostering local IP creation, and driving innovation. “I am confident that these funds will enable startups to attract talent, establish local facilities, and develop export potential for the next decade. As the Indian economy and startup ecosystem, particularly the new space sector, continue to grow, the consistent revenue generation and performance of space tech startups will be vital in reinforcing the government’s confidence in the Indian new space ecosystem,” remarked Arpan Sahoo, Co-founder and Chief Operating Officer, KaleidEO.
Similarly a few of the VC funds have also expressed positive vibes at the announcement of such as fund. “The Indian space economy has the potential to reach $44 billion in the next 10 years from the current $8.4 billion (Source: IN-SPACe), expanding India’s share of the global space economy by 4x from current 2 percent to 8 percent. We strongly believe that an INR 1000 Crores fund for space startups and space economy will catalyse India’s dominance in the global space market. We believe the trust and focus from the GoI combined with the FDI policy announced earlier this year will lead to more investment participation in the sector from India and internationally,” said Vishesh Rajaram, Managing Partner, Speciale Invest.
Interestingly, Speciale Invest has been active investors in this domain since 2018 and its portfolio includes investments in launch vehicles (Agnikul Cosmos), satellite manufacturing and earth observation (GalaxEye Space, Kawa Space), communication (Astrogate Labs), and in-orbit economy (InspeCity).