Investors chase desi cos that crack AI use cases

Mumbai: The rapid evolution of AI and emergence of ‘real’ use cases around the technology have spurred investor appetite for AI startups and fund managers are chasing Indian players in this space even as broader tech funding remains tepid.Japan’s SoftBank may have set the tone for the tech funding landscape for the coming years, with its CFO Yoshimitsu Goto announcing last week: “We are an investment company and we want to lead the era of AI in many ways.”

Singapore-based venture capital firm Antler, which recently closed its $75-million India fund for backing pre-seed stage startups, has made eight AI investments (both India-based as well as those led by Indian-origin founders) through it, four of which are yet to be announced. AI startups in India have raised $91.7 million in funding this year so far as compared to $29.6 million in the year-ago period, according to market research firm Tracxn. “AI has been overriding the number of pitches we got in the last 12 months,” Rajiv Srivatsa, partner at Antler, told TOI. In India, not many companies are building foundation AI models yet (like OpenAI’s GPT-4 and Google’s Gemini) but those like Bengaluru-based Sarvam AI and Bhavish Aggarwal’s Krutrim AI that have managed to build them, have raked in millions from investors. Last year, Sarvam raised $41 million from investors including Lightspeed and Peak XV Partners in early stage funding, while Krutrim is valued at $1 billion. “Foundational models require more capital. For apps, it’s becoming difficult to differentiate given the pace of innovation in the core models,” said Srivatsa. Several local startups are instead building AI-centric products and applications for enterprises and consumer centric businesses. For instance, India and US-based startup Attentive, which recently bagged a $7-million funding led by Vertex Ventures Southeast Asia and India is building an AI-based sales automation platform for outdoor services and construction industry. “AI is not a hype anymore. We are already seeing real use cases of AI. Today, AI is lot more powerful, it is generating data in a few minutes which otherwise would have taken years. Earlier, AI used to work on data generated by humans and business processes,” said Nishit Garg, partner on venture capital firm RTP Global’s Asia investment team, which is evaluating Indian AI startups. RTP Global has invested in AI security startup SydeLabs, which is led by Indian founders and is based in India and the US. “Every company will have to use AI in some form or else they will become obsolete,” Garg added, underlining growing investor interest in companies building AI solutions. AI is touching several spaces. In the fast fashion space, companies are using GenAI to develop new styles in line with consumers’ requirements. “What probably in the past was being done by 10 humans can now be done by two humans and an AI application. Such use cases make business processes smooth and reduce business costs,” said an investor. In 2023, even as broader software and SaaS investments declined, funding in generative AI surged to $250 million from $15 million in 2022, a Bain report showed. Early stage accelerator fund 100Unicorns has launched a $200-million fund from which at least $20 million will be allocated for AI and deep-tech startups, said co-founder Apoorva Ranjan Sharma. “We have the best AI and IT brains in India. Why won’t we be able to create something better than ChatGPT?” Sharma said.
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