Fund focus: Pi Ventures triples its deep tech firepower
While deploying its debut fund, India-based machine learning specialist Pi Ventures realised it was in fact a deep tech generalist. LPs have come along for the ride
When India’s Pi Ventures raised INR 2.2bn (USD 26.4m) for a debut fund focused on artificial intelligence (AI) in 2018, voice recognition, facial recognition, and in-traffic vehicle detection were all the rage. But that’s old hat now.
AI may be entering its next hype cycle with large language models (LLMs) and generative AI, but Pi sees the category as having become too mainstream for the grassroots upside it seeks. Fund II has consequently broadened the firm’s mandate to deep tech, with continued interest in AI but an equal passion for material science.
“Material science is a core fabric of the world. Just as AI and data are on the digital side – on the physical side, it’s material science,” said Manish Singhal, a founding partner of Pi (pictured), flagging applications spanning industrial, biotech, and alternative protein use-cases.
“Not many funds are focusing on material science right now because it’s in the same state that AI was 5-6 years back. People were experimenting with what you can do. Those are the areas we like. We have to be ahead of things that are happening.”
The philosophy has clearly resonated. Fund II is more than three times larger than its predecessor, collecting INR 7bn from existing and new LPs. Investors include Small Industries Development Bank of India (SIDBI), which put in INR 1bn, British International Investment, fund-of-funds Nippon India Digital Innovation AIF, Accel Partners, Premji Invest, and Belgium’s Colruyt Group.
It marks the culmination of a slow transition. Pi studied material science for three years before placing its first bet. Now much of the firm’s activity appears entirely unconnected to its original AI remit. For example, last April it backed Zero Cow Factory, an animal-free dairy products developer.
Along the way, the team grew from two to eight, including seven investment professionals and one operations specialist. Several standout deals garnered a reputation for deep tech savvy and amplified inbound deal flow. They include cancer screening player Niramai, mental health chatbot Wysa, space tech supplier Agnikul, and Pixis, a marketing automation provider that raised USD 100m last year.
Still, downplaying an increasingly established segment in favour of new frontiers has required Pi to lean on storytelling as much as track record. Singhal described the fundraising process as largely an exercise in deep tech education. But this caught the ear of several entrepreneurs and family offices, including professionals from the likes of IBM, Facebook, Google, and Flipkart.
“We break it down and map it. What does deep tech mean? Why will it change the world? What kind of companies are we seeing, and how does that link to making good investments,” Singhal said. “That sort of dialogue is what people get convinced around. Some don’t, but there are a lot who do.”
The more interesting aspect of the response from LPs could be that despite the sector thesis broadening – blockchain is also part of the mix – the overall strategy remains decidedly niche. Overlaying its deep tech specialisation, Pi remains a single-jurisdiction investor.
Singhal observes, however, that India is the fastest-growing deep tech market globally, although growth is coming from a low base. He notes that many of the strengths that have helped the local software-as-a-service (SaaS) segment spawn global leaders are now nurturing deep tech.
These include a rich pool of technical talent, an enhanced post-pandemic awareness of cross-border opportunities, and a more capital efficient company building environment.
Singhal estimates that deep tech companies in India can develop products at a 4x-5x lower cost versus their counterparts in the US – an advantage that becomes all the more important when pre-revenue gestation times are long.
“Israel and the US are saturated deep tech markets, and their rate of growth is very low. Deep tech in India unlocks different kinds of opportunities to invest because the rate of growth gives you better returns,” he said.
“It’s for people who are interested in backing a growing market versus a grown market. Those are the kinds of investors we’re attracting.”
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