Armed with ideas: How India’s defence startups are thriving

There is this thing about bombs,” says Abhishek Jain. “They shouldn’t explode when they are not supposed to, but have to when they are meant to.” The 44-year-old is in the business of making dumb bombs smart.

Chief business officer of the Pune-headquartered Zeus Numerix, a company that is among the trailblazers in India’s defence startup narrative, Jain’s story began in 2004 when, as a 24-year-old with an MTech in aerospace engineering from IIT Bombay, he began to think what next.

Son of a government defence auditor and hailing from the small town of Mhow in Madhya Pradesh, Jain got together with two of his IIT Bombay laboratory colleagues―Basant Gupta (then 23) and Irshad Khan (27). Along with their mentor Professor Gopal Shevare, they founded Zeus Numerix. Gupta was designated the chief executive officer, Khan the chief operating officer and Shevare became the director. Zeus Numerix was the first company to register with IIT Bombay’s Society for Innovation and Entrepreneurship.

“When we started in 2004, my monthly salary was Rs13,500, low, even then, for an IIT passout,” says Jain. “It was just enough for dal-roti. But we did well and, except for 2009-10, we have made profits.” He shies away from revealing how much he is earning now.

Zeus Numerix now makes smart drone-dropped bombs. After starting with ownership of one software for large-missile aerodynamics, the company ventured into structural design of missiles, guidance and control, electromagnetic and stealth technology.

Jain, chairman of the StartUp Forum of the Society of Indian Defence Manufacturers (SIDM), recounts his company’s high points. “We did critical work in integrating the BrahMos missile with the Sukhoi Su-30,” he says. “The first water tunnel test of the indigenous LCA (light combat aircraft) was done in our laboratory.”

SIDM is the apex body of the Indian defence industry that acts as an enabling link between the government, the armed forces and the industry.

The story is pretty much the same for most startups in India’s defence landscape―young, enterprising minds getting together, pooling resources, operating on a shoe-string budget and scaling heights. No wonder there is such a buzz around them! Says Sameer Joshi, CEO and director of the Bengaluru-based NewSpace Research and Technologies: “The government is trying its best to invigorate the private ecosystem beyond the existing big players like Adani, Reliance, Kalyani, Mahindra, L&T and Tata. These initiatives have kick-started and catalysed the startup ecosystem.”

Established in January 2018, NewSpace made its first unmanned aerial vehicle (UAV), or drone, by the end of the year. It is now among the biggest names in the defence startup sector, making long-endurance drones, robotic swarms and combat intelligence suites. It supplied the world’s first high-density swarm drone system to the Indian Army and was involved in the design of the HAL’s Warrior Loyal Wingman project.

Bengaluru-based Tardid Technologies began in 2016 from a Café Coffee Day outlet. Says Aastha Verma, Tardid’s COO: “Every day, we would start our work at CCD at 10am. This routine continued for 16 months, until we finally moved into a 12,000sqft space. I still can’t fathom how we managed to do all of this without external support.”

Unsurprisingly, Verma and her team, which has now grown to 60 employees, often found themselves at sea. Literally.

“None of us knew how to swim, yet we were in the middle of the sea with the Indian Navy,” she says. “It was the first trial of our electric on-board motor. We were told that another OBM on trial had failed and were asked to assist in the rescue. Despite our inexperience, we took on the challenge, braving gusty winds, rain and the rough sea.”

Tardid’s products integrate physics and machine learning principles. A key product provides an artificial intelligence-based platform that gives autonomous capabilities to ships and boats, applicable to both surface and underwater vessels.

“Our autonomous surveillance boat, Meglan, has keen interest from global customers like Egypt, Saudi Arabia, Kuwait and Bangladesh,” says Verma.

A company that has become a role model for startups is Tonbo Imaging. It has equity investments from Artiman Ventures, Celesta Capital, Qualcomm, Edelweiss and HBL Power Systems, and has raised over Rs300 crore to fund R&D. Its products include imaging technologies like gun sights, computer vision, and other intelligent systems. Says its 49-year-old, globetrotting founder-CEO Arvind Lakshmikumar: “We began in 2009. More than 50 per cent of our revenue comes from international customers.”

Apart from the Indian military, Tonbo sells to a few foreign nations, NATO and even to Mossad. Its contract manufacturing takes place in Bengaluru and Mysuru. “I am glad that we could support the Indian armed forces in critical operations like the Uri strike and post-Pathankot surveillance and security,” says Lakshmikumar.

Supplying about 25 products, Tonbo employs around 250 people, most of them ex-servicemen―skilled sharpshooters and snipers. “They know the job best,” says Lakshmikumar. “My employees include former US Navy Seals and former Mossad people, too―people who have been there and done that.”

Another cutting-edge, deep tech startup is Agnit Semiconductors, which is being incubated at the Indian Institute of Science, Bengaluru, and is privately-funded. Agnit is making India’s first gallium nitride semiconductor product. Its components are used in wireless electronics systems ranging from radars to jammers to missile seekers to radios. It started operations in 2021.

Says its CEO and co-founder Hareesh Chandrasekar: “By December 2024, production samples meeting military specification requirements will be ready for full system integration and mass production.”

Often, startup ideation has an unusual beginning. Like the Bengaluru-headquartered NimbusParc. Its director, Srinivas Reddi, recounts: “I was doing well in the corporate sector in the US. During drinks one evening in California, some American friends questioned the capability of Indians. It rankled and struck real deep. I decided I will do something on my own.”

Started in 2015, NimbusParc makes cutting-edge technology products in the real-time data transfer space―a key advantage in network-centric warfare. Its products are used by the DRDO.

“During the past few years, we have witnessed exceptional ideas coming from a wide spectrum of individuals and startups,” says Reddi. “It is exciting that monopoly and exclusivity flavoured characteristics of defence technology has been altered to a more participatory and inclusive approach with the private sector, especially startups.”

The growing excitement in defence startups has spawned an ecosystem across India that has spurred about 400 startups that are active in about 350 projects under the Innovations for Defence Excellence (iDEX) and in about 100 under the Technology Development Fund (TDF). iDEX and TDF are defence ministry schemes to handhold startups.

In June, the landmark 350th iDEX contract was inked with SpacePixxel Technologies to make miniaturised satellites for the Indian Air Force. Under the TDF, 27 defence technologies have been successfully realised. S.A. Pasupathy, co-founder and director of Coimbatore-based Zeekers Technology, says the iDEX programme offers benefits to startups in terms of IP rights, co-funding and marketing opportunities in India and abroad. Zeekers developed an AI-enabled welder’s helmet (for real-time display of welding parameters that enables immediate corrective action).

The latest to join the slew of government schemes is ADITI (Acing Development of Innovative Technologies with iDEX) to “support the development and acceleration of innovation in critical and strategic deep-tech technologies”which are in the nascent stage of research and development in the country. ADITI will provide startups up to Rs25 crore for defence technology research, development and innovation.

Srijan, a portal, has also been set up for private industry, on which the defence PSUs and service headquarters offer items for indigenisation.

Moreover, several government policies like barring the import of thousands of items and equipments in five “positive indigenisation lists”have helped in bringing more domestic entrepreneurs to the defence market.

Till June 2024, more than 36,000 defence items were offered for indigenisation, of which more than 12,300 items have been indigenised in the last three years. As a result, the DPSUs have placed orders on domestic vendors to the tune of Rs7,572 crore.

Startups have also organically weaved into the supply chain of defence production. In 2023-24, India’s defence production touched an unprecedented Rs1.27 lakh crore―a growth of 16.7 per cent from the previous year. About 79.2 per cent was contributed by DPSUs and other state-owned public sector units, while the private sector (20.8 per cent) also recorded a steady growth. While startups are at a nascent stage, they are the new avenues of promise.

Recently, an Israeli company has inked an MoU with a Surat-based Indian deep tech drone startup, InsideFPV, to buy 10,000 drones. A company source said they would be “kamikaze UAVs”.

The DRDO has recently sanctioned seven new cutting-edge projects to MSMEs and startups under the TDF scheme. They include developing an indigenous toolkit for simulator training of pilots, an underwater-launched UAV and a dual-use vehicle for detection, classification, localisation and neutralisation of underwater objects.

R. Shivaraman, chief technology officer of Chennai-headquartered Big Bang Boom Solutions, says government initiatives are creating an ecosystem that fosters innovation and indigenous manufacturing. “Every week, we engage with the defence ministry and various stakeholders,” he says.

Set up in 2018, the company is into next-generation defence solutions, including upgrades for combat vehicles, anti-drone systems and advanced AI-based solutions. It has secured an order worth over Rs200 crore from the IAF and the Indian Army for its counter-unmanned aerial systems technology in one of the largest contracts the defence ministry has awarded under iDEX.

“The defence ecosystem today is on the cusp of a change similar to that which the space sector underwent three-four years ago, in terms of policy reform and sustained governmental support,” says Agnit’s Chandrasekar. “There has been no better time to focus on defence markets if you are a startup.”

ideaForge, which was established in 2007, has carved out a name in making drones tailored for intelligence, surveillance and reconnaissance applications. “We started in 2007 as a group of passionate IIT Bombay alumni, including Vipul Joshi, Rahul Singh, Ashish Bhat and myself,” says Ankit Mehta, CEO, ideaForge.

ideaForge has grown significantly, expanding from the innovation cell in IIT Bombay to establish manufacturing facilities in Mumbai. “We dedicate 22 percent of our annual revenue, amounting to over Rs47 crore last fiscal, to R&D,” says Mehta. “Our commitment to indigenous production ensures that imports constitute only 21 per cent of our costs, enhancing our financial sustainability.”

Collaboration is among ideaForge’s strong points. For example, a joint effort with GalaxEye focuses on developing a foliage penetration radar to enhance surveillance capabilities in dense forests.

Startups in the defence sector also grapple with the unpredictability of revenue from the defence and government clients as events like contracts and procurement orders are difficult to predict.

Reddi of NimbusParc says that procurement procedures and systems are not fully in place to welcome startups and MSMEs. “The procedures continue to favour DPSUs and large vendors who can survive the long procurement cycles,” he says.

Sustained funding continues to be a big challenge for startups. “Another issue is the infrastructure needed to develop, test and certify products,” says NewSpace’s Joshi. “While the government is supportive, there is a lack of coordination and availability between the private industries and the DRDO and PSUs.”

Ahmedabad-headquartered Optimized Electrotech makes surveillance equipment for strategic and civilian applications and a series of weapon sights. Started in 2017, its first product came out in 2019. The company’s managing director Sandeep Shah says understanding how to navigate through procurement has been the biggest challenge.

“A longer revenue cycle is a major concern in defence manufacturing sales, although it has been addressed in its majority via the new defence acquisition procedure,” he says.

Tardid’s Verma says startups in the defence sector often face unique challenges such as stringent regulatory requirements, long gestation periods, and the need for heavy investment in R&D. “However, these challenges present opportunities for startups to carve out niches and disrupt with innovation,” she says.

Lakshmikumar of Tonbo points out another lacuna: “The government’s policy and intent is spot on, but there are companies that import knockdown Chinese systems, assemble them and call the product Indian-made.” He adds that a critical policy from the government should be to weed out these companies and separate the wheat from the chaff.

Constrained by several limiting factors, defence startups are tested to the fullest. “The stark fact is that over 60 per cent of these companies fail to complete the first couple of years of existence, mostly because of non-involvement of the end user in a better product definition and sustainment,” says Joshi.

But, there may be good news in store regarding funding. An official of the Chennai-based South Indian Defence Suppliers and Startups Association has requested the Defence Innovation Organisation to relax the funding part. “The startup’s share may be 30 per cent, while 70 per cent comes from DIO (instead of 50-50),” the official says, requesting anonymity.

The official mentioned another challenge that is not being addressed. “One of the important worries for startups is minimum order quantity (MOQ),” he says. “With no guarantee on MOQ, the founders of many startups invest huge amounts. The details of MOQ at the announcement of the project will make the startups work happily on the project.”

Access to testing facilities is also a major problem. “The defence ecosystem in the country has excellent facilities for product development and testing which are not accessible to startups or external users given ‘security concerns’,” says Chandrasekar. “Surely allowing startups subsidised use of niche development and testing facilities would go a long way in speeding up indigenous product development and adoption.”

Encouraging startups is all the more important because, more often than not, these efforts by young entrepreneurs have a nationalistic connect. In their small size lie the critical advantages of flexibility and ability to adapt to any given situation.

B. Krishnamoorthy, special secretary and project director, Tamil Nadu Industrial Development Corporation Limited (which looks after the defence industrial corridor), thinks startups are the engines of future economic growth and technological innovation. “Tamil Nadu is in the forefront,” he says. “In fact, Tamil Nadu has one of the largest number of iDEX winners. We have created centres of excellence in collaboration with major players like Dassault Systems, Siemens and GE Aviation which ensure that the tools and expertise from these majors are available to startups.”

So, while the defence startup sector is abuzz with developments, there is a lot more that can be done in terms of governmental policy, guidelines and schemes. If atmanirbharta in defence technology and production is the destination, startups may well become the highway, one day.

As NewSpace’s Joshi says: “The private sector industry needs to ‘walk the talk’ and support in delivering what is most needed for the defence of our nation.”