A quick not on the Defence India Startup Challenge!

1. THE DEFENCE INDIA STARTUP CHALLENGE
The Make In India initiative of the Government has over the last 3 years actively percolated into various
Ministries, including the Ministry of Defence (MoD). The MoD through the 2018 amendment of the
Defence Procurement Manual opened its gates to goods manufactured by Startups as recognized by the
Department of Industrial Policy and Promotion (DIPP). This amendment comes to light after a realisation
of the growing need to keep pace with technology and the innovation and technological advancement
potential of Startups that could be integral to the continuous advancement program of the Defence
Forces.
(i) The Defence Innovation Fund
As a step further towards recognizing Startups in the defence procurement and production arena,
the MoD established the Defence Innovation Fund (DIF), which is responsible for creating and
fostering innovation and technological advancement in defence and aerospace by engaging
industries including MSMEs, Startups, individual innovators, R&D institutes and academia. The DIF
will also provide grants/funding and other support to carry out R&D development, which has the
potential for future adoption in Indian defence and aerospace needs. The DIF is managed by a
Section 8 company called the Defence Innovation Organisation (DIO) incorporated by two Defence
Public Sector Undertakings, namely Hindustan Aeronautics Limited and Bharat Electronics Limited.
(ii) The 11 Defence Innovation Challenges for Startups
The innovations for Defence Excellence (iDEX) – the executive arm of DIO was launched earlier this
year with the purpose of building an ecosystem of innovation and entrepreneurship in India for
the defence sector. On 5th August 2018, MoD announced The Defence India Startup Challenge as
a joint partnership of the DIO and Atal Innovation Mission inviting Startups, Micro, Small and
Medium Enterprises (“MSMEs”) and individuals to provide prototypes and solutions to 11
requirements of the Indian Defence Forces. These 11 requirements also known as 11 challenges
have been kept open-ended so as to provide room for innovation and out of box solutions. The
Startup Challenges were announced with a vision to create functional proto-types relevant for
national security; blend innovation with the Defence procurement and production process; and
lastly to find markets and early customers for new in-depth products in the context of Indian
Defence Sector. The 11 challenges are:
1. See through Armour
2. Carbon Fire Winding
3. Individual Protection System with built-in sensors
4. Active Protection System
5. Development of Advanced Technology Based Desalination System (Water purification)
and Bilge only Water Separation system
6. Remotely Piloted Airborne Vehicles
7. Laser Weaponry
8. Artificial Intelligence in Logistics and SCM
9. Secure Hardware based offline Encryptor Device for Graded Security
10. Development of 4G/LTE based Tactical Local Area Network
11. Unmanned Surface and Water Vehicles

2. Applicants selected by the high-powered selection committee would be awarded grants up
to Rs. 1.5 crores in the form of equity/debt/other relevant structures.
The Atal innovation Mission is a Government of India flagship initiative for promotion of
innovation and entrepreneurship in the country. The shortlisted Startups will also be provided
incubation facilities through the Atal Innovation Mission’s incubation labs.
(iii) The Valleys of Death
The MoD has analysed the existing Startup ecosystem and its problems. The analysis has assisted
the MoD to recognize the key problem, i.e availability of funds to carry out essential operations.
The Startup Challenge refers to this problem as the Valleys of Death (as indicated in the figure
below.) According to the analogy, Startups face critical financial impediments not only during the
initial development stages but is a continuing problem through its growth stages. The Startup
Challenge aims to address this problem and encourage Startups to start considering the Indian
Defence sector as a viable market for latest innovative products and technologies. The framework
indicated in the figure above not only aims to create an interest and opportunity for angel
investors, venture capitalists and private equity players to invest in Startups working in the
defence sector but also portray them as essential players in the Defence Sector and Startup
relationship.
(Valley of Death representation is available in the About us section of http://aim.gov.in/idex/)
(iv) Realizing Investment Potential
The recent efforts of the Ministry of Defence to create an interest for angel investors, venture
capitalists and private equity players in defence sector Startups can be traced to the recent $ 1
million angel investment by Keiretsu Forum in Aadyah Aerospace Private Limited; Artiman
Ventures, Qualcomm Ventures and Walden Riverhood Ventures backed Tonbo Imaging; WRV
Capital and IndusAge Partners backed ideaForge and many more.

3. We hope this trend continues and Startups contribute to play a much larger role in our defence
industry.
For details on the Startup Challenge or anything relating to the Defence sector, please reach out to
our team at Spice Route Legal:
Praveen Raju – praveen@spiceroutelegal.com
Mohana Moparthi – mohana.moparthi@spiceroutelegal.com
Kinjal Parikh – kinjal.parikh@spiceroutelegal.com