Stranded ventures on the 5G speedway

Back in 2018, in his final year of engineering college, Pradip (name changed on request) and three of his hostelmates started up a venture to deliver medical supplies using drones. The undergrads aimed for the sky, hoping to transform traditional air freight services through the use of unmanned craft that could fly beyond the operator’s visual line of sight. 

Globally, however, aviation regulators disallow unmanned flights without complete oversight, as even a momentary loss of connection can lead to serious mishaps, including loss of life. This huge limitation can be overcome with the use of ultrafast internet that allows the pilot to continually guide the craft remotely in real time. This is where 5G — the fifth-generation cellular network — can be a game-changer for drone operators and allied businesses such as Pradip’s start-up.

Ahead of the 5G spectrum auctions in 2021, in a bid to demonstrate the technology’s use cases, an Indian telecom company showcased the work of Pradip’s fledgling start-up to a gathering of bureaucrats from the Department of Telecommunications. However, despite the much-hyped launch of the 5G network in India by Prime Minister Narendra Modi during the India Mobile Congress (IMC) the following year, the next-gen technology has all but faded into oblivion. 

Aside from a handful of tech enthusiasts, the technology has failed to capture the imagination of the average Indian consumer in the absence of demonstrable and differentiated use cases. Struggling to catch the interest of telecom companies and investors alike, Pradip’s project was grounded prematurely and the young engineer moved to another new venture, this time in the field of machine learning. 

His reasons are all too obvious. “Take a look at generative AI, where VCs [venture capitalists] are tripping over themselves to fund start-ups since the end-use cases are popular and easily understood by customers. In the case of our drone project, an added hurdle is the absence of an FAA-like [the US Federal Aviation Administration] regulatory framework in India for beyond-line-of-sight drones. No VC will step in until a proper drone ecosystem is in place.”

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Sped-up and stalled

Even as Reliance Jio and Bharti Airtel jostle to take credit for the “fastest rollout of 5G in the world” by end-2023, Indian start-ups dependent on the technology in the domain of IoT, edge computing, gaming and enterprise applications are grappling with shrinking funds — from $639 million last year to $134.1 million, as per Tracxn. 

A starkly different scenario had played out in the case of the older 4G technology with the entry of Reliance Jio in the telecom market in 2016. Popularly termed as the ‘Jio effect’, the sudden availability of cheap and high-speed internet set off a data boom countrywide and, in its wake, a funding deluge and rapid growth for consumer tech start-ups such as Flipkart, Ola and Paytm, among many others. 

From $3 billion in 2016, fundraising for Indian internet start-ups zoomed to $9.5 billion in 2017. 

Given the tepid consumer interest in 5G, several telecom operators have been forced into pause mode. State-backed BSNL is rolling out its 5G network at snail’s pace as it is “not missing out on much”. Vodafone Idea’s inability to maintain its 4G network is of greater concern to its 228-million subscriber base than an upgrade to 5G.

Part of the reason for the slow uptick in demand for 5G and the start-ups reliant on it is the quality of the network itself. As Faisal Kawoosa of technology market research firm TechArc says, “The 5G network at the moment is patchy at best. This does not inspire confidence among private fundraisers.” 

An estimated $30-plus billion is needed to deepen the country’s 5G infrastructure, but not much of this will come from VCs, which typically stick to $2-5 million cheques, says Girish Shivani, Fund Manager and Executive Director at YourNest. “So far we haven’t seen any major investments in this sector. We feel that large corporations such as Jio and Siemens, along with the Government, will drive innovation here. One major reason for the lack of innovation is that 5G is still restricted to metros,” he says, adding that tier-2 and -3 towns will take 5-6 years to warm up to 5G in the absence of a perceived need for it.

Enter the incubators

With private players staying away, the Centre’s role assumes greater importance in the incubation of 5G-related start-ups. In the 2023 Budget the government proposed to set up 100 labs for developing 5G services. In October the Prime Minister announced the names of 100 universities, including various IITs and regional engineering colleges, that will be part of the government’s efforts to engage with student start-up communities. The telecom department, too, has announced two new programmes focused on 5G start-ups, namely a hackathon and a partnership. Selected start-ups will receive, on average, funding of $120,000 each from these programmes.

Niral Networks, a private operating system for 5G, is one such start-up. Launched in 2019, it largely works on pilots for the government and major Indian enterprises. It has set up eight 5G labs, and works with universities and multinationals to better understand 5G use-cases for individuals and companies alike.

“We are bootstrapped, besides being funded by the revenue from our projects,” says its founder and CEO Abhijith Choudhary, adding that each project fetched ₹20 lakh to ₹1 crore. 

He is now exploring markets in West Asia and Southeast Asia. 

Vikram Singh, Founder of Tech Eagle, another drone-based delivery start-up, offers a similarly optimistic take, “The launch of 5G in India was a slow process — the spectrum was allocated late, and the network rollout is still not ideal. However, start-ups with genuine capabilities will see no dearth of funding. This can be seen as a filtering process.”

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