A place to build, not to scale

A deep-tech founder once said Chennai is a great place to tinker with ideas and build products at the intersection of science and hardware. Cutting-edge research institutes and the ability to get things made physically make it a great place to build. The same cannot be said for scaling, taking prototypes to market.

That is demonstrated by the flight of several notable deep-tech startups that began in Tamil Nadu, predominantly within the IIT Madras ecosystem. Many did not leave the moment they broke out. A founder of a unicorn said being away from the startup conferences and venture capitalists of cities like Bengaluru helped build products with conviction in the earlier part of their journey. The company moved out later, at its lead investors’ insistence, though the founder said that it also made sense in terms of scouting for talent.

Vish Sahasranamam, co-founder and CEO of Forge Innovation and Ventures and a key figure in the defence innovation programme iDEX, says Tamil Nadu has lower talent density, not just in engineering but in go-to-market and operations, which pushes startups out. “The moments when startups are exposed to capital and customers in Bengaluru and Pune, they want to move out for justifiable reasons. While the private sector and education institutions have to play a role, the govt should do the heavy lifting in creating the initial momentum.”

“We need to stop operating in isolated silos where IT and MSME departments manage their own programs with fragmented budgets. Govt must create a central innovation mission, directly under the Chief Minister, to establish a common umbrella of governance. Splitting a `500 crore budget across five different centres only dilutes leadership and prevents us from reaching critical mass. To generate outsized, non-linear returns, the govt must concentrate its capital, find the right experts, give them complete autonomy, back them with serious funding and let them run it, no questions asked.”

“Our large industrial majors should work with startups to implement pilot projects, make strategic investments or step in as their actual manufacturing partners or create corporate venture studios. By coupling a startup’s ‘zero to one’ innovation with an industrial partner’s ‘ten to one hundred’ production scale and brand equity, we can fix the entire journey from a lab project to a massive, full-stack industrial venture,” he said.

Bluehill VC managing partners Manu Iyer and Sridhar P say TN’s main weakness is not talent or infrastructure but low local appetite for risk and a shortage of early-stage capital. “In Bengaluru, successful founders and angels routinely write small early checks for many startups. In TN, investors are seen as conservative, preferring bonds and basic equity, which limits early-stage funding and discourages entrepreneurs. Without capital, entrepreneurs do not take risks, and without startups and successes, capital does not come, creating a negative feedback loop,” they said.

They added that startup quality and deal flow have declined from six to eight years ago. Many places that lacked deep-tech incubators a decade ago now have them, so founders no longer feel they must be in Tamil Nadu.

Ashok Jhunjhunwala, chairman of the ITEL foundation and a key architect of the IIT Madras Research Park, said that to hold its lead and multiply that success, Tamil Nadu needs to align policies, sharpen focus and put the right people in place.

“Tamil Nadu’s hype from the industry is less compared to other hubs, which is helpful. We started in the 80s, and it took years of trial and error to get industry, academia and research to work together before we became successful. I believe the research park model can be replicated, and we are working with various institutions, including non-IITs in Tamil Nadu and elsewhere,” he said.

Recent stock market runs in South Korea and Taiwan show that tech innovation, state backing and manufacturing can capture enormous value faster than almost any other sector. Policy tailwinds, including the union govt’s RDI fund, and early deep-tech ventures’ progress on commercialisation, are adding to the momentum. Having largely missed the consumer and tech startup wave of the mobile era, TN could regain ground in the new economy if it leverages its strengths, mobilises resources and excels in execution.