While the government’s push for indigenisation has made it easier for startups to enter the defence sector, venture capital firms and individuals are still hesitant.
It’s a multi-pronged problem.
Defence startups tend to have longer-than-average gestation periods, are extremely capital intensive, strictly regulated and have unreliable payment schedules from government contracts. It’s the picture perfect image of a risky bet for most VCs in the ecosystem.
Dr Ajay Kumar noticed this during his tenure as Union Defence Secretary and moved to fix the problem. He was involved in setting up iDEX—Innovations For Defence Excellence—which formally launched in 2021.
During Defence Expo 2022, the first ever conference was setup up for VCs, the financial world and the defence startup ecosystem to find a way forward.
The results were not encouraging.
“Most of the participation came from banks and long-term lending institutions, that’s not what startups needed really,” says Dr Kumar.
Following his retirement, Kumar started his own VC firm—Mount Tech Growth Fund—a category II alternate investment fund which focuses on startups working in the national security, defence & aerospace, and digital communications sectors.