Even as Indian telcos complete the nationwide rollout of the 5G network, investments for 5G start-ups have shrunk dramatically to $134.1 million in 2023 compared to $639 million last year. This is according to data shared by Bengaluru based start-up data platform, Tracxn.
Indian telcos, Bharti Airtel and Reliance Jio are expected to invest upwards of $30 billion to deepen the 5G network infrastructure, however, unlike the 4G wave, this has not attracted a wave of investments into the Indian start-up ecosystem exploring a myriad of use cases for 5G.
Indian start-ups for 5G are working with a smaller kitty of funds. Tracxn provided fundraising data for 5G-related start-ups in the domain of IoT, edge computing, gaming and enterprise applications, who will fundraise $134.1 million in 2023, a number which has in fact shrunk from the last year at around $639 million.
VC firms wary
As monetizable use cases for 5G continue to remain unexplored and unclear, venture capital firms are unlikely to be the major backers here as the sector is highly capital intensive with a slim chance of success.
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Girish Shivani, Fund Manager and Executive Director at YourNest told businessline, “The venture capital firms are unlikely to be the major backers here as the sector is highly capital intensive and most VCs would write $2-5 mn cheques plus. So far we haven’t seen any major investments in this sector so far and not many start-ups have also come up in the last few years. We feel the large corporations such as Jio, Siemens etc along with the Government will drive innovation here. One major reason why we have less innovation in this sector is that 5G connectivity is still restricted or focused in the metros only. Tier 2/3 towns will take another five or six years to see 5G connectivity in those cities as users don’t see any need plus for service providers there is hardly any incentive.”
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The funding problem for telecom related start-ups is largely restricted to 5G-based start-ups. Tracxn also shared that funding for Indian start-ups in the telecom hardware space increased from $690 million in 2022 to $2.4 billion in 2023. However converse trends were seen for use cases. Faisal Kawoosa, Chief Analyst and Tech Arc added that it is not just the amount of funds needed to develop use cases that has caused VC firms to balk at providing funding; but the quality of the 5G network itself, “Even though telcos claim that they have nearly completed nationwide rollout of 5G network, the network continues to be patchy and cannot be used. Thus most private investors will not trust 5G tech to really take off in the near term.”