Manufacturing startups struggle with funding capacity vs demand
Venture and growth capitalists are increasingly focusing on India’s manufacturing startups, yet firms confront a systemic financing obstacle: backers require proof of market demand and recurring purchases prior to allocating sizable funds, whereas industrial buyers typically demand that production capacity be in place before issuing bigger contracts.
Kaushik Mudda, who co-founded Ethereal Machines and serves as its CEO, noted that such conditions pose a tough launch scenario for businesses that require heavy capital. “When you want lots of customers to take a bet on all of this, you need to be able to show them that the capacity is already there,” he said.
Ankit Kedia, the founder and principal investor of Capital-A, identified industrial automation, components, deep-tech, energy infrastructure, medical devices, space technology, electric vehicles and advanced materials as sectors gaining momentum. He observed that interest is moving toward companies whose manufacturing process itself forms a competitive barrier.
Kedia explained that the unifying factor lies in the process itself, how a product is engineered, built and rolled out, rather than merely its design, and that this is where a firm’s defensibility originates.
Kedia further noted that artificial intelligence is simplifying software duplication, prompting investors to focus more on tangible capabilities. He pointed to power-electronics, storage parts and grid hardware as examples of understated infrastructure segments that may gain from this trend.
The financing gap widens as firms move from pilot projects to full-scale production. According to Jinesh Shah, managing partner at Omnivore, businesses frequently need significant funds at this juncture yet are considered premature for conventional bank loans and too sizable for seed-stage backers.
“There are also very ordinary things that can hold growth back: delays in customer approvals, unreliable suppliers, production problems and long payment cycles,” Shah said.
Ajay Modi, a director at Piper Serica, observed that capital providers now demand a functional prototype, customer validation and a clear route to recurring orders, instead of merely supporting the wider Indian manufacturing narrative.
Jashank Pohani, who leads family-office relations for Artha Group, indicated that the potential reaches beyond new ventures to established manufacturers that could be modernised and automated.
“Not every manufacturing opportunity needs venture capital at all,” Pohani said, pointing to established businesses with customers, cash flows and manufacturing know-how but limited modern technology and management.
