AI startups in India seem to be bucking the trend of a funding winter that looms over the startup ecosystem. The share of VC investments in AI startups currently stands at 15% of the total VC funding in the first five months of 2023, compared to 10% in 2022, indicating the bullishness of investors towards AI. The growth in share of AI investments over the last three years reflects the industry’s bullish sentiment and deal activity around AI. Despite the difficulty in economic environment, AI-focused ideation among startups in India is on the rise as interest in deep tech, especially AI, has emerged as a darling of venture capitalists.
Data from research firm Venture Intelligence shows that VC investments have slumped significantly in 2023 compared to 2022, and accordingly, AI investments, including 28 deals worth $0.5 billion, are much lower than 114 deals worth $2.4 billion in 2022. However, AI giants and startups are continuing to show favorable investment trends, especially in early-stage funding, as investors see the potential of tech innovations.
Some of the top AI deals from this year include AI-powered software composer Builder.ai’s $250-million raise from Qatar Investment Authority, an enterprise AI player Mad Street Den raised $30 million in a series-C round led by Avatar Growth Capital, Exfinity Fund, which made three deals in AI in 2023, Peak XV Partners, which formerly Sequoia India, made two deals, and Lightspeed Ventures made two deals as well.
Many entrepreneurs in India are exploring ways to strengthen their business proposition with AI, either to prevent AI-driven disruption in their product or as a new fad. Investors are actively seeking out startups with unique insight and strong execution capabilities, particularly in the pre-seed and seed stage. India-dedicated funds are well-stocked with dry powder worth tens of billions, indicating a steady early-stage deal flow in the coming months. Arun Natarajan, founder of Venture Intelligence, sees sectors with tailwinds such as AI and electric vehicles as the first beneficiaries in such a situation. As such, investors will undoubtedly continue to put their money toward promising AI startups in India, indicating the enduring interest and potential of the industry.
