Indian AI Startups Face Funding Crunch
Indian startups, particularly those in the artificial intelligence (AI) sector, are experiencing a funding slowdown. Venture capital (VC) and private equity (PE) investments have significantly decreased, with deal sizes shrinking considerably.
Data from research agency Traxcn reveals a sharp decline in AI startup funding. In 2022, Indian AI startups secured $599 million in funding. However, this figure plummeted to $168.4 million in 2023, representing a 71% drop. Since January 2024, only $31.9 million has been raised across three rounds.
This trend contrasts with the global AI funding landscape. According to Crunchbase, global AI startups raised $50 billion in 2023, up from $45.8 billion in 2022. The first quarter of 2024 saw $12.2 billion invested in AI startups worldwide.
The average deal size for Indian AI startups has also shrunk. In 2022, the average deal size was $14.7 million. This figure dropped to $7.1 million in 2023 and has slightly recovered to $10.6 million in 2024 (until May 3).
Despite the funding challenges, some Indian AI startups have managed to secure significant investments. Krutim, an AI venture founded by Bhavish Aggarwal, raised $50 million from Matrix Partners and achieved a $1 billion valuation. Sarvam AI, which is developing large language models, raised $41 million from investors including Lightspeed Venture Partners and WestBridge Capital.
Despite the current funding slowdown, the potential of AI remains significant. According to McKinsey, half of the world's work could be automated by 2060, and generative AI could contribute $4.4 trillion annually to the global economy.
While the Indian AI startup ecosystem faces challenges, the long-term prospects for AI remain promising. The sector continues to attract investments, and innovative startups are emerging with the potential to shape the future of AI.