Since then, a new generation of software-as-a-service (SaaS) companies and AI-driven AI tools have emerged and are gaining traction, improving the prospects of the world’s third-largest startup ecosystem . And going forward, it’s also something that is expected to result in significant financial commitments when the dark winter of funding recedes.
So it’s natural that investors are bullish on AI, even as other technology areas with unproven commercial prospects struggle to find funding. While the Indian AI startup ecosystem is at a nascent stage at the moment, venture capitalist We are sure that it is poised for growth in several areas, which could even have a global impact. A new generation of Indian AI first or AI-native startups could meet the needs of the world in the years to come.
“In India, it’s a very exciting time, but it’s still early,” said Rajan Anandan, managing director of capital risk the PeakXV Partners company and the Surge seed platform.
“Despite all the discussions and significant funding, I would say we are still in day one of AI innovation globally and also in India.”
He added that within two years, India could have hundreds of AI companies with global reach, growing very fast and presenting very compelling value propositions. “The opportunity is huge,” he said.
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The past year has also seen the release of several major ‘AI for India’ language models, whether it’s Krutrim AI’s Krutrim model, backed by Ola founder Bhavish Aggarwal, which includes 10 languages Indian languages, or the OpenHathi Hindi model from Sarvam AI. Thus, even if efforts are clearly made to build AI for IndiaIndian startups also do for the world.
GenAI Startups
According to the top body of the technology industry NasscomIndia now has more than 100 generative AI startups and the ecosystem has raised a total of $700 million over the past three years, ET reported on January 4.
According to Nasscom’s Generative AI Startup Landscape in India 2023 report, around $8 billion was invested in AI startups between 2013 and 2022, including $3.24 billion in 2022 alone, in over 1,900 Indian AI startups.
“We believe AI is a long-term and very secular investment opportunity,” said Arpit Maheshwari, director at Stellaris Venture Partners. He added that there are two broad areas of AI that are seeing success. First, the application of AI to create significantly better and more intuitive consumer experiences when it comes to software; and second, content generation. “Both categories of use cases are very well applicable on both the enterprise and consumer side,” Maheshwari said, adding that AInative SaaS companies are seeing tailwinds. Venture capital firm Lightspeed believes that the SaaS ecosystem is on the cusp of innovation-driven growth with the advent of technologies such as generative AI.
“Over time, most SaaS categories have become crowded and new players are competing on topics outside the core R&D, such as product experience, pricing, service, packaging, branding. , etc. “, said
Hemant Mohapatra, Partner at Lightspeed India and famous author in the field of entrepreneurship and technology.
“It’s more about GT M-based differentiation, which is why many SaaS sales cycles are now longer. Customer loyalty has also declined a lot, pricing has become the main lever to win a deal, and so on,” added Mohapatra.
AI-driven SaaS
“Thanks to recent developments, a new generation of AI-driven SaaS will emerge, which will re-emphasize R&D and innovation. “That’s what investors like Lightspeed are really looking for: new, very different, insight-driven products,” he added.
Lightspeed has pioneered most early-stage investments in Indian AI startups, including conversational AI platform Yellow.ai, content marketing startup Pepper Content and video creation platform Rephrase.ai which was acquired by Adobe.
In 2023, Lightspeed backed AI startups like Saravam AI, creator of Indic LLM, LLMOps platform Thena, and on-demand AI workforce provider Gushwork. SenseAI Ventures believes that AI tools or AI infrastructure segment is expected to emerge as one of the growth areas, as businesses move towards increased adoption of AI.
“We will see several unicorns emerge from this segment and at least one 50 global companies,” said Rahul Agarwalla, co-founder of SenseAI Ventures. “We are optimistic about this sector because we believe that every company will use AI and therefore will need the tools and infrastructure to develop AI. »
The company recently announced the launch of its Rs 200 crore SenseAI Fund I dedicated to investing in 18-20 AI-focused startups at the Seed/Pre-A stage. He made four
has already successful exits and currently has a portfolio of 12 SaaS AI, B2C AI and AI tools companies, with Cureskin and Skit.ai reaching Series B. Nasscom said that nearly $700 million have been invested so far in Indian generation AI startups, with around 70 percent of the funding arriving in 2022 alone.
But around 70 percent of Indian generative AI startups continue to be unfunded, compared to just 33 percent of their global counterparts who are unfunded, the report said.
Beyond the foundation
For Anandan, most of the value will be generated not by startups that build fundamental models, but by those that build on them. Promising areas include companies that focus on AI tools and infrastructure or “LLMOps,” those developing AI-based personalized content generation applications, and AI vertical companies that build for specific domains .
“We think India is going to be a very exciting place for global AI vertical companies to come from…India is going to have hundreds of them,” Anandan said.
PeakXV backs AI tools and infrastructure startups like True Foundry and Inferless, AI vertical companies like Arintra, a Bengaluru-based medical coding startup, and Noida-based Attentive, which focuses on outdoor services, and custom video creation company genAI Gan.ai, among others. It also invested in Sarvam AI.
“New SaaS founders are building it on AI first,” Anandan said, adding that many India-funded SaaS companies across segments will also become AI-driven businesses.
According to Ashish Bhatia, founder and CEO of startup accelerator India Accelerator, startups working on AI in healthcare, finance, cybersecurity, enterprise AI and A.I. generative activities attract funding.
“While these areas are booming, other AI startups are struggling to get investment,” Bhatia said. Companies developing specialized hardware for AI applications, startups focused on robotic solutions requiring large capital investments and those whose businesses depend on complex hardware infrastructure are facing problems, he said. declared.
Long-term research-focused companies, such as those conducting fundamental AI research with unclear commercial applications or startups exploring unproven or nascent AI technologies with long development cycles, have also struggling to attract investment, Bhatia said.
Google’s eye
Apart from venture funds, even tech giant Google has been optimistic about the AI prowess of emerging startups in India. For the eighth batch of its startup accelerator program, Google has selected 20 AI-focused startups in their Series A pre-screening phase.
Some of these include video personalization platform Gan.ai, engaging slide maker Presents.ai, high-tech fashion e-commerce company NeuroPixel.ai, and music creation platform Beatoven.ai .
The accelerator offers a three-month equity-free program where selected startups receive mentorship and support in areas such as AI/ML, Cloud, User Experience, Android, Web, product strategy and growth.
The fact that India’s startup ecosystem is diverse, extending beyond AI and software to consumer products, healthcare, financial services, etc., means that investments are not concentrated in AI unlike what they can be elsewhere, according to Anandan. “This year, the total startup investment in India will be perhaps $8-10 billion. That (the amount spent on AI startups) is probably less than 10% of that,” he said.
“In the United States, the percentage of startup funding devoted to AI this year will be very high. While in India, the situation will be mixed. It will not be the biggest by far, like what you will see in the United States,” he added.
But we are still in the early days and India is just getting started.
