Ajay Kumar, a former bureaucrat who retires as India’s defence secretary in 2022, has made a big move into the venture capital world. Kumar has set up Mountech Growth Fund, a new venture capital firm that will focus on incubating early-stage startups in the defence, aerospace and deep tech sectors.
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Mountech Growth Fund has gained momentum rapidly, raising Rs 2,500 crore and receiving subscriptions worth Rs 2,800 crore. The fund has also received approval from the Securities and Exchange Board of India (SEBI) and plans to exercise a greenshoe option for an additional Rs 2,500 crore.
What is the Kavach Scheme?
The fund’s first initiative, aptly named “Kavachi”, is set to revolutionise the startup ecosystem in the aerospace and defence sector. Primarily backed by Suryakant Dalmia, director at Dalmia Securities, Kavachi is backed by various high net worth individuals and family offices across the country.
VC Fund Leadership and Advisory Team
Ajay Kumar serves as chairman of MountTech Growth Fund, while former telecom executive Ravi Setia is CEO. The fund also has top retired military officers such as former Indian Air Force Chief Rear Admiral RKS Bhadauria and former Indian Navy Vice Chief Admiral SN Gormade as advisors, along with prominent industrialists and business professionals.
Strategic Partnerships and Initiatives
In a recent strategic move, the fund signed a Memorandum of Understanding (MoU) with T-HUB at DAIS 2024. The initiative is aimed at backing startups focused on making India ‘Atmanirbhar’ (self-reliant), especially in critical technologies such as national security, defence, aerospace and digital communication.
Speaking at the signing ceremony, Ajay Kumar said, “I and my friends are extremely proud to have set up a venture capital fund focused on strategic sectors like defence and aerospace, which require much more capital and risk-taking than investments in software and e-commerce.”
The growing aerospace and defense startup ecosystem
India aims to reduce its reliance on imports of defence equipment and technology and increase defence exports to capture a share of the $2.1 trillion global defence market.
Through its “Make in India” initiative, India aims to reduce its reliance on imports of defence equipment and technology, increase defence exports and capture a share of the $2.1 trillion global defence market.
Currently, India accounts for 3.7% of global military spending, which will reach $76.6 billion by 2022, making it the third-largest military spender in the world after the United States and China.
India’s aerospace and defense sector has seen a surge in startup activity, driven by central government initiatives such as the Ministry of Defense’s Innovations for Defense Expansion (iDEX) program. Under iDEX, the ministry offers grants to startups and contracts to develop technologies for the Indian armed forces. Currently, iDEX has partnered with about 400 startups and small and medium-sized enterprises and has secured government procurement for 35 items totaling about INR 2,000 crore.
Impactful investments and future prospects
According to Tracxn data, in 2023, companies in the aerospace, defense, and maritime sector raised $230 million across 67 funding rounds. In 2024, $74.1 million has been raised across 28 funding rounds so far. The latest iDEX program has made available grants of Rs 250 crore, and it is expected that the space sector will be a key beneficiary of the R&D program.
Mountech Growth Fund aims to forge partnerships with boutique venture capital firms and incubators at academic institutions such as the Indian Institute of Science, Bengaluru and the Indian Institute of Technology, Kanpur. This strategic approach will help source and nurture promising deals in these key areas.
Mountech Growth Fund has the potential to play a pivotal role in driving innovation and technological advancements in India’s aerospace and defence sector. The fund aims to contribute to India’s goal of self-reliance in critical technologies by supporting start-ups and fostering a strong ecosystem, paving the way for a safe and technologically advanced future.
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