'Not yet convinced deep tech startups have reached Series B moment': Fundamentum's Sanjeev Aggarwal

As venture capital firms increasingly focus on India's deep-tech landscape, The Fundamentum Partnership is adopting a more cautious stance. With the announcement of its latest fund, targeting a total of Rs 2,200 crore, including a Rs 400 crore greenshoe option, Co-founder and General Partner Sanjeev Aggarwal expressed uncertainty about whether deep-tech startups have truly reached the Series B investment phase. "We are still not clear whether the Series B moment for deep tech has arrived or not," Aggarwal stated in a conversation with Business Today. He emphasized that while artificial intelligence (AI) is well-integrated into various business models, deep tech presents unique challenges that require further evaluation. The firm, established in 2017 by Nandan Nilekani and Aggarwal, is one of the select few India-focused funds concentrating on Series B investments. Fundamentum's third fund is set to support growth-stage startups across sectors including consumer technology, fintech, and AI-driven businesses, with initial investments ranging from Rs 100-150 crore. Aggarwal noted that the real challenge with deep tech lies not in the potential it holds, but in assessing its viability. "We don't think a typical fund like ours can evaluate the underlying technology," he remarked. Instead, the firm plans to focus on customer adoption as a key indicator of a technology's success. If a technology sees significant enterprise or commercial uptake, Fundamentum believes it can enhance value by assisting founders in accelerating their market strategies and expanding internationally, leveraging its operational expertise and connections. This cautious outlook on deep tech contrasts with the firm's strong belief in AI, which it no longer views as a standalone investment category. AI is seen as a transformative capability that is reshaping industries from finance to education. General Partner Prateek Jain highlighted how the cost of leveraging AI has dramatically decreased, enabling services to become economically feasible for a broader audience. Aggarwal anticipates that AI will vastly improve access to digital services for India's approximately 400 million mobile internet users. He pointed out that AI-driven services like wealth management and personalized tutoring could extend sophisticated offerings beyond just affluent urban consumers. Mayank Kacchwaha, another General Partner at Fundamentum, added that AI-enabled conversational interfaces could further promote digital commerce and financial services, particularly benefiting users who prefer voice interactions over text. Fund III marks a significant commitment from Nandan Nilekani, who has anchored the fund. His involvement extends beyond financial backing, as entrepreneurs often seek his insights and mentorship, making him a vital source of unique investment opportunities. Since its inception, Fundamentum has launched its first fund of $90 million in 2017, backing notable companies like Spinny and PharmEasy. The second fund, raised in 2022 at $200 million, invested in 11 startups, with several already securing follow-on funding. With Fund III, the firm aims to maintain a focused portfolio of around 10 companies while allocating capital to support its top-performing investments. As Fundamentum looks ahead, it appears the next wave of growth investing may be primarily driven by AI. However, deep tech must first demonstrate its ability to consistently convert technological advancements into commercial success before it can become a mainstay in Series B funding.