During the July-September period, financing for artificial intelligence (AI) startups in India fell 10% on a quarterly basis and 50% on an annual basis, according to data obtained by ET from market tracker Venture Intelligence. There were 31 agreements and $125 million in funding.
The number of deals increased by 72% year over year and by 55% quarter over quarter. The majority of the most well-funded AI firms are in the enterprise software sector.
The quarter saw some of the biggest deals, including the $28 million enterprise AI assistant company Nurix AI, founded by Mukesh Bansal; the $14 million industrial operations optimization startup Uptime AI; the $10 million data analytics SaaS startup e6data; and the $10 million AI-powered HR platform Vahan.
Although funding quantities are being recalculated as market volatility affects valuations, experts said the notable uptick in agreements shows that investor interest in AI is still high. According to them, bigger fundraising rounds might start up again in 2025 when investor confidence levels out and AI businesses show better returns on investment.
According to Vikram Gupta, managing partner of IvyCap Ventures, “There are multiple points of inflection that we are going to see in AI penetration across sectors, and therefore the AI investments are likely to increase quite substantially over a period of time,” “You may not see a substantial impact of that over the next couple of quarters or so, but if you look at a five-year window, I think AI investments will exponentially increase.”
He went on to say that now that the anxiety around the US presidential elections has subsided, there may be a minor increase in investments during the January–March quarter of 2025, especially from dollar capital from the US.
Abhishek Prasad, managing director of Cornerstone Venture Partners, stated, “It’s important to highlight that the adoption of AI will primarily be driven by enterprise, and therefore we see most of this applied AI investments happening in the enterprise software ecosystem.”
The maturation of AI investments will lead to a shift from hype-driven funding to more sustainable investments based on real metrics like operational efficiency, customer acquisition, and scalability, creating promising funding opportunities for AI startups that can deliver measurable ROI, Prasad said, adding that businesses are finding ways to integrate AI into their value propositions and operations as they move past early-stage experimentation.
According to Rahul Agarwalla, managing partner at AI-focused fund SenseAI Ventures, the rise in acquisitions is a positive indication that there are more high-caliber AI firms.
“It is a better metric as it does not get skewed by a few large investment rounds,” “We expect the number of deals to keep growing even while investors become more selective as their understanding of AI becomes more nuanced rather than driven by FOMO (fear of missing out) or hype.”
According to Somshubhro Pal Choudhury, partner at the Bharat Innovation Fund, the figures should be interpreted in light of the substantial investments that poured into the foundational model companies in 2023. In contrast, 2024 funding has signaled a shift towards developer tools and AI applications, which call for smaller initial round sizes and infrastructure layout.
According to Deepak Sharma, managing partner at seed-stage startup accelerator India Accelerator, as businesses look for ways to increase productivity, data insights, and automation, AI applications in enterprise software, healthcare, fintech, and law are likely to find ongoing attention.
According to him, the adoption of AI by businesses, corporate security concerns, and the changing regulatory landscape will all be major motivators.
A favorable funding trajectory is expected in 2025, according to Kritika Murugesan, senior director of deep tech and startups at industry association Nasscom. “India’s AI startup ecosystem has shown exceptional resilience and adaptability, even amid shifting funding trends,” she added.
India’s share of GenAI startups worldwide doubled between the first half of 2023 and the first half of 2024, according to Murugesan, highlighting the nation’s position as a center for AI-driven developments across the AI stack, including models, enterprise platforms, productivity tools, and industry-specific solutions.
