Today’s food delivery startups may be tomorrow’s deep-tech stars

India’s startup ecosystem is growing rapidly.

By Dhruv Garg and Soumya AK

India’s startup ecosystem has grown rapidly, with thousands of new ventures emerging every year. Recently, Union Minister Piyush Goyal raised concerns over the state of India’s innovation landscape, urging startups to broaden their focus beyond convenience-based services like food delivery and quick-commerce. Industry veteran Mohandas Pai also highlighted the disparity in funding between India and China, noting that India received $160 billion in startup investments from 2014 to 2024, while China secured $845 billion.

This sentiment reflects the belief that India’s startup ecosystem relies too much on low-margin, consumer-facing companies rather than deep-tech industries like AI, semiconductors, and robotics. However, this view overlooks the significant role consumer internet companies can play in India’s technological future. A balanced approach is needed - one that acknowledges the achievements of current startups while focusing on the steps necessary to make India a leader in deep-tech industries.

Building blocks of future growth

While the call for a shift towards deep-tech innovation is important, criticism of India’s focus on consumer internet startups - especially in food delivery, online gaming, and quick-commerce - is misplaced. These companies, often seen as merely convenience-driven or entertainment-oriented, are playing a vital role in shaping India’s technological future. The innovations in AI, machine learning (ML), data analytics, and blockchain they develop are laying the foundation for future advancements in industries like healthcare, finance, and manufacturing. In essence, India’s consumer internet startups are not just driving economic growth today but also laying the groundwork for India to become a leader in the technology sector in the future.

India’s startup ecosystem has seen remarkable success in sectors like food delivery (Zomato, Swiggy), e-commerce (Flipkart, Ajio), quick commerce (Blinkit, Zepto), and online gaming (Dream11, MPL, Gameskraft). These companies have disrupted business models, revolutionized consumer behaviour, and created millions of jobs. However, they are often dismissed as short-term, low-tech ventures. Critics argue that India should focus more on deep-tech industries.

Yet, these consumer-facing companies are driving substantial technological advancements. Zomato, Swiggy, and Zepto have invested in AI, machine learning (ML), and automation to streamline logistics, optimize supply chains, and predict consumer behaviour. These innovations are not just transforming food delivery or quick commerce but form foundational technologies that will be applied across other sectors. The AI and data analytics developed for consumer-facing applications will spill over into industries like healthcare, finance, and manufacturing.

Quick commerce is thriving in India, even as the model has struggled globally. The model has succeeded in India by adapting to local challenges and urban consumer behaviour. These companies leverage technology to optimize delivery systems and meet the growing demand for speed and convenience, all while maintaining relatively low costs. Their success shows how India’s consumer tech companies are innovating and scaling efficiently with business models tailored to meet local needs.

Online Gaming: A deep-tech sector in disguise

Similarly, big online gaming companies are pushing the envelope in AI, ML, and blockchain technology. These companies use AI to match skill levels between players, enhance fraud detection, and personalize user experiences. AI also lowers customer acquisition costs (CAC) by helping companies better target and retain players. These companies are integrating blockchain for secure transactions and transparent gameplay, innovations that extend beyond gaming and have applications in industries such as finance, e-commerce, and cybersecurity.

Frugal but innovative

Indian consumer internet startups stand out for their ability to grow into large enterprises despite having limited funding compared to global competitors. Indian startups have demonstrated remarkable frugality, innovating with fewer resources while scaling rapidly. Many have achieved significant market penetration while keeping operational costs in check, showcasing their ingenuity and resilience.

Geopolitical challenge

While Indian companies are making strides in AI and other technologies, their efforts are hampered by the high cost of access to computational resources, which are influenced by global geopolitical events. For instance, US restrictions on AI models and compute power significantly affect Indian companies that rely on cloud infrastructure for research and development. In contrast, the US government has announced billions in funding for AI and tech development, along with support for tech infrastructure.

India’s public investment in AI and related technologies remains modest. The absence of government support puts Indian startups at a disadvantage compared to global players, who benefit from government-backed funding and policies. To stay competitive, India must increase support for research and development in AI and other emerging technologies, creating an environment where startups can thrive.

The criticism of India’s consumer internet startups overlooks their significant role in driving technological progress. While deep-tech industries are critical for India’s long-term competitiveness, the innovations brought by consumer internet companies are equally important. These companies are laying the foundation for AI, machine learning, and other technologies that will power industries.

India must continue supporting both consumer internet companies and deep-tech ventures. The key to global leadership in technology is fostering an innovation ecosystem that nurtures all forms of technology.

Dhruv Garg is the Founding Partner and Soumya AK is an Associate Director at the Indian Governance and Policy Project (IGAP).

Views are personal and do not represent the stand of this publication