What separates semiconductor companies that attract funding from those that do not? As investor priorities evolve, proprietary IP, financial discipline and scalable business models are becoming decisive factors.
India’s semiconductor ambitions are entering a new phase. While government incentives, supply chain diversification and domestic manufacturing have dominated industry discussions since 2021, investors are increasingly looking beyond production capacity. Instead, proprietary intellectual property (IP), differentiated technology, and sound corporate governance are emerging as the defining factors for attracting capital.
Speaking during an IESA Startup Mitra webinar organised by the India Electronics and Semiconductor Association (IESA), Gaurav Asthana, managing partner at Transjovan Capital, shared insights into how mergers and acquisitions (M&A), growth capital and strategic investments are evolving within India’s semiconductor ecosystem.
He believes the country’s growing domestic demand, combined with global interest in supply chain diversification, has created a significant opportunity for semiconductor businesses, provided they focus on building long-term technological capabilities.
India reaches an important milestone
Gaurav described the current period as a turning point for India’s semiconductor industry: “India is at a semiconductor inflection point. The window is now.”
He attributed this momentum to several converging factors, including the global ‘China Plus One’ strategy, government initiatives under the India Semiconductor Mission (ISM), now that its second phase awaits a positive nod from the Union Cabinet.
He also recognised the appearance of local semiconductor production and increasing regional demand from contemporary sectors like electric vehicles (EVs), military, communication, channels, and power electronics.
Besides, the demand for India on the international level is going up. Automation states that now companies from Japan, Germany, Israel, and the United States are actively looking for their partners and investment destinations.
Capability has overtaken capacity
One of the key points made during the discussion was the change in priorities among investors. Gaurav pointed out, “In the past, capacity was the main priority in the IT and electronics markets. The situation today, however, is different; everything is focused on capability.” In his words, investors are now prioritising firms that possess proprietary technology over those that own major manufacturing facilities.
For instance, this trend is most evident in the field of semiconductor design, where the ownership of intellectual property is now viewed as more important than revenues from engineering services.
Gaurav cited the example of NXP’s acquisition of Kinara since “this acquisition was not about income but rather about capabilities.” In his opinion, this acquisition proves that it is possible for Indian companies to create semiconductor IP that has strategic value for foreign companies in the tech industry.
Therefore, for entrepreneurs in the field of semiconductors, it will lead to a significant change in the way companies are assessed. “Now, IP ownership is what defines exit multiplier as opposed to revenue received from services,” shared Gaurav.
Capital is flowing selectively
Investment trends are rising throughout the semiconductor industry, but not consistently.
Gaurav found that there is considerable interest from both venture capital and strategic investors in chip design and IP, electronic manufacturing services (EMS), printed circuit board (PCB) production, and semiconductor equipment and manufacturing sectors.
Meanwhile, fabs and outsourced semiconductor assembly and testing (OSAT) industries are still largely dependent on corporates’ investments due to high capital costs and slower payback periods.
In addition, he mentioned the growing frequency of capability-based acquisitions, growth capital investments, and strategic partnership activities as firms work to improve their technological portfolios.
Investors look beyond revenue
As Gaurav suggested, the success of fundraising depends on a number of factors other than revenue growth. The investors analyse the quality of the technology, customer base, management team, governance practices and profitability of the company before investing. He stated, “The keyword is quality, not revenue size.”
He described that companies which have recurring business from a variety of customers are viewed better than those which depend on very few large contracts. In particular, customer concentration becomes problematic if a small number of clients generate the biggest part of revenue.
Furthermore, profitability is crucial here. Gaurav believes that “Your IP is only as good as the margin. If you are not able to get good margins, you are effectively a low-value-add business.”
Strong margins prove that a company with its technology provides significant value, rather than being a low-margin service company. Investors examine managerial depth, financial discipline and export capabilities.
Not every investor has the same objective
Gaurav emphasised that company founders tend to think that all investors evaluate businesses in the same way. However, in reality, their strategies for investing may differ enormously.
For example, corporate venture capital firms may sometimes invest in a company simply because its technology fits into their long-term plans or may serve as an acquisition target in future. Traditional investment firms usually pay more attention to financial returns from investments, while later-stage PE companies are more interested in mature companies with predictable growth.
In capital-intensive industries like fab and OSAT, he believes that patient capital from government-related institutions and long-term investors is more appropriate than conventional venture funding.
Preparation starts long before fundraising
While saying that funds are available, Gaurav warned that investors are becoming choosier: “Capital is available, but it is very selective.”
For firms that want to secure funding, it is critical to be prepared well in advance. He noted, “Being ready to face investors is not a question of three to six months. It is a process stretching between 12 to 18 months.”
He suggested that as soon as they decide to go for investments, entrepreneurs must improve their governance processes, implement strong financial controls, avoid related-party deals, and create strong management teams.
Another important factor entrepreneurs should take into account is complying with various regulations. Restrictions on technology transfer, Press Note 3 regulations governing investments from neighbouring countries, obligation to retain talent after an acquisition, and regulations related to government incentives on investment can all play a role in the successful closure of any transaction.
Gaurav advised that entrepreneurs approach professionals at the earliest possible stage: “Contact professionals early on, not after you receive a term sheet.”
Looking ahead
While India still faces a long journey in advanced semiconductor manufacturing, Gaurav, as a representative of the industry, remains optimistic about the country’s prospects, particularly in semiconductor design and product development.
He believes India’s expanding domestic market, policy support and engineering talent provide a strong foundation for future growth. However, sustained investment will increasingly depend on companies building differentiated technology, strong governance and scalable business models.
As India’s semiconductor ecosystem matures, investors appear to be sending a consistent message: manufacturing capacity alone is no longer enough. Long-term value will increasingly be created by companies that own technology, develop intellectual property and demonstrate the ability to compete globally.
[Based on the insights shared by Gaurav Asthana, managing partner at Transjovan Capital, during the IESA Startup Mitra Monthly Webinar titled ‘M&A and Growth Capital Opportunities in the Indian Semiconductor Sector’. It’s been transcribed by Shubha Mitra, Electronics For You.]
