Saankhya Labs: A deep-tech startup that's slowly going places

With 5G technology coming in, the world is at the cusp of a telecom revolution. This will enable players like Saankhya Labs which has massive capabilities in software-defined radio technology to benefit in terms of business. The company is working on open and virtualised radio access network solutions that will enable telecom operators to optimise spectrum use and reduce cost of ownership.

“Earlier the industry only had vendor-specific hardware, now a lot of open frameworks are creating fresh business opportunities,” said Naik.

With 3G and 4G telecom systems, the core hardware and software components were integrated. But now with 5G, Naik said, telecom systems will also be managed, deployed and provisioned like IT infrastructure. This will open up new business avenues for companies like Saankhya Labs.

The beginning of the journey

“We were a bunch of crazy guys to even imagine building something like this, but we did,” said Naik, co-founder, Saankhya Labs.

Saankhya Labs is the second venture for the team that first started Smart Yantra Technologies back in 1999, during the dot com boom. Naik said that they had built technology related to screen casting, which was too early at that point in time. The company was acquired by American company Genesis Microchip in 2004, and eventually in 2007 the same team got together to start Saankhya Labs.

“A bunch of angels had gotten good returns from our previous acquisition, hence they supported us this time too and we got Saankhya Labs up and running,” Naik said.

Even if VC money has been hard to come by, the company has managed to start making money in the business. As per latest financials sourced from business intelligence platform Tacxn, in FY18-19 Saankhya Labs made a net profit of Rs 19 crore on an overall revenue of Rs 76 crore. In FY17-18, it had a revenue of Rs 51 crore and reported a net profit of Rs 5 crore.

Capital Hungry

Building a deep tech startup needs tons of capital, something that has not been easy to come by for Saankhya Labs. The startup did get investors like Intel and General Motors, but they have exited now, making way for American company Sinclair Broadcasting Group. The last funding round was in March 2019, when the company raised $13 million.

“It is very difficult to explain our business model to venture capitalists, so much so that I do not even talk to Indian investor circles, we have to look outside for capital,” Naik said.

Naik understands the conundrum of local VCs who may be reluctant to invest in such a venture. First, most of the investors, Naik believes, are from business backgrounds and hence do not understand core engineering products. Second, VCs need to make money in a short time and deep tech startups are never built in a few years. Players like these need patient capital which can only give returns after 10 to 15 years. Such capital is difficult to come by.

“Mostly VCs prefer to put money in ‘me too’ startups,” he said.

Customer Profile

Typically, for a startup like Saankhya, a telecom company could be a customer, and they are in talks with multiple operators for deployment of their solution across the United States and the European Union.

This is where the current geo-political tensions have played in its favour. Given China-based Huawei is facing a lot of heat from the United States, many other startups are seeing a glimmer of hope in grabbing market share in the US. Even in India, local telecom companies are looking at indigenous solutions to promote the ‘Atmanirbhar’ scheme.

The current technology upgradation tender for 4G services from BSNL is on the radar of the company.

Saankhya Labs has also participated in a programme with the Indian Railways where trains are being tracked using satellite data. Its systems have helped power tracking of trains within an interval of 15 seconds, monitoring their movement and ensuring they run on time.

“It was started with around 3,000 trains, now they are looking to fit these trackers on another 6,000 trains. If every train comes fitted with these devices, it can help increase safety of train travel as well,” Naik said.
The company is also working with defence equipment manufacturers to build wireless receivers and help overhaul the communication systems of the defence forces.

As the ‘Make in India’ theme gets pushed further, the defence forces are looking at Indian entities for advanced technology. Saankhya Labs with its capabilities to deploy end-to-end indigenous SDR chipsets has grabbed that opportunity.

Going Forward

Naik and his team understand that massive business opportunities lie in the western world where technology is more advanced and procurement systems are much more organised. While they will continue looking for business opportunities in India, they will double down on their plans in the US and Europe. While their research and development centres are in India, Saankhya Labs has an American subsidiary and wants to scale up its presence there.

“We are also looking for growth funding, talking to multiple strategic partners in the United States,” said Naik. The company is looking for $15 to 20 million of growth funds to secure a business runway over the next four to five years.

Now, given the aversion towards using Chinese technology in India and the US, the homegrown company believes their time has finally come. They say ‘Make hay while the sun shines’ and perhaps the next few years is going to be their time under the sun.