360 One Asset’s investment in Indian defence tech start-up Constelli is based on a compelling macro thesis around modern conflicts. These often begin with disabling or disrupting communications, radar, and surveillance systems, validating the idea that electromagnetic warfare is decisive before kinetic weapons are even deployed.

“If you look at the core components of electromagnetic warfare, you have waveforms, emitters, jammers, and so on. These need to evolve continuously. It’s a cat-and-mouse game where adversaries’ detection and jamming improve, so evasion and counter-systems need to advance,” said Abhisek Nag, a senior fund manager and strategy head for early-stage VC at 360 One Asset.

“It’s a domain that’s very well suited for continuous upgrades. In a way, electromagnetic warfare looks a lot like consumer electronics, B2B hardware, or AI [artificial intelligence].”

Constelli, which develops systems for electronic surveillance and advanced signal analysis, raised USD 20m via a round led by General Catalyst and supported by 360 One Asset and existing backer Pravega Ventures. The proceeds will support R&D into next-gen electronic warfare and communications payloads for use on drones, land-based equipment, ships, and space platforms.

Modernisation push

There is an emphasis on scalability and rapid iteration. Unlike traditional defence hardware, electromagnetic warfare systems are software and algorithm heavy, which means faster innovation cycles and potentially higher margins.

There are government tailwinds too, with India’s Defence Acquisition Council recently signing off on approximately INR 800bn (USD 9.6bn) in procurement proposals aimed at boosting the operational capabilities of the armed forces.

This modernisation push is heavily focused on indigenisation, with 90% of the proposals designated for domestic sourcing. A key component is high-frequency software-defined radios and automated electronic-intelligence platforms, which allow real-time data sharing and enhanced electromagnetic warfare capabilities.

Nag is also bullish on India’s defence start-ups going global. “India is very open to exporting defence hardware and technology to friendly nations. And there’s early evidence that Constelli could also be one of those exporters of these kinds of technologies,” he said.

GPs that have previously invested in defence tech have voiced concerns about companies being unable to commercialise and scale, citing limited buyer pool potential alongside slow procurement and complex compliance. Nag, however, does not share this view.

Provided companies are well capitalized, they should be able to qualify on technical manufacturing and scale, he said. Equally important is diversifying customer bases and guaranteeing dual-use capability of products early on to mitigate against business risks.

Dedicated fund

360 One Asset has underlined its commitment to defence and space through an INR 10bn fund dedicated to such investments. The vehicle launched six months ago, and a final close has been pencilled in for the end of March. There will be a roughly even split between early and growth-stage opportunities and late-stage investments.

The fund is expected to back 15-20 companies in total. Constelli is the fourth, joining a portfolio that includes space situational awareness start-up Digantara, aerospace and defence electronics-focused CoreEL Technologies, and space tech specialist Sisir.

The very existence of the fund is seen as reflecting the growth and maturation of India’s broader defence industry. Meanwhile, increasing openness to private capital and clearer sightlines to exit are helping 360 One Asset build conviction in start-ups.

“These companies have existed for 10-20 years and never gotten private capital but suddenly they are able to raise money and go public in two to three years,” Nag said.

“That’s when we realised it’s an opportunity we need to go after. And we started really building our thesis within defence – what we like and what we do not like, and understanding all of the different facets of this very complex industry.”