Venture capital investors chase Indian AI startups

MUMBAI: Artificial intelligence, which is rapidly gaining stride in India and making its way into every other sector, has also become a hot bet for venture capital funds.

These funds are allocating a higher share of investment dollars for AI startups. The usage of AI as a tech tool is not new but why it is piquing investor interest is because its use cases are expanding - in India, for instance, founders are now looking beyond enterprise tech to build AI-led solutions for consumers. Naman Lahoty, partner at Stellaris Venture Partners, said that the firm will double down on AI investments this year. "Most of the tech pitches we see these days are from AI startups. But what is most encouraging is that we have started seeing a lot of AI-first businesses building for consumers as well. We are seeing AI companies building in content, gaming, astrology, health and other spaces. They are offering hyper-personalised experiences in local languages at affordable prices," Lahoty told TOI.

Lightspeed has invested over $2 billion across more than 100 companies globally over the past decade, more than $1 billion in the last 12 months and this focus will continue in 2025 as well, said Hemant Mohapatra, partner at the VC firm which has backed companies like Qure AI, Zepto and PhysicsWallah.

The number of pure play AI startups (those building core AI foundational models) in India are not many as of today - estimates suggest there could be around a few thousand of them but the ecosystem will grow. "The AI solution is very much dependent on good technical resources which is not an issue in India. The country in general will be a big contributor in AI space, be it pure play or as part of other product or solutions offering," said Anil Joshi, managing partner at Unicorn India Ventures, about 40% of whose portfolio companies are building in the AI space.

Bhavish Aggarwal's Krutrim AI, which is already valued at $1 billion and Peak XV Partners-backed Sarvam AI, are among Indian startups that are building AI models. AI startups (includes pure play AI companies as well as startups with strong AI use cases) have raised $1.2 billion in funding from investors last year, data sourced from market research firm Venture Intelligence showed.

AI remains in the innovation phase in India and will continue to dominate startup funding in 2025, said Gaurav Kothari, principal at Prosus. "AI companies that have demonstrated strong traction and clear signs of product market fit will attract significant growth capital," he said. Sandeep Murthy, MD at Lightbox India Advisors, said that it would be keen on investing in consumer tech startups which are using AI effectively. "We believe tech focused funds backing enterprise tech, SaaS models will see AI as the centrepiece of their investment thesis in 2025," said Murthy.


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