Indian AI Startups: The New Frontier for Venture Capital

Artificial intelligence (AI) is rapidly gaining momentum in India, making its mark across various sectors. This technological evolution has caught the eye of venture capital funds, which are increasingly allocating a larger share of their investments towards AI startups. The allure of AI lies not just in its technological novelty but in its expanding use cases, moving beyond enterprise tech to consumer-focused solutions.

Investor Enthusiasm for AI-First Businesses

Naman Lahoty, partner at Stellaris Venture Partners, highlights the growing interest in AI-first businesses catering to consumers. "We are witnessing a surge in AI companies venturing into content, gaming, astrology, health, and more, offering hyper-personalized experiences in local languages at affordable prices," Lahoty told TOI.

Global and Local Investments in AI

Lightspeed, a global venture capital firm, has invested over $2 billion in more than 100 companies, with a focus on AI startups like Qure AI, Zepto, and PhysicsWallah. Hemant Mohapatra, a partner at Lightspeed, anticipates this trend to continue throughout 2025.

Despite the current limited number of pure-play AI startups in India, the ecosystem is poised for growth. Anil Joshi of Unicorn India Ventures emphasizes India's potential as a significant contributor to the AI space, with about 40% of their portfolio companies operating in this domain.

Notable Indian AI Startups

Bhavish Aggarwal's Krutrim AI, valued at $1 billion, and Sarvam AI, backed by Peak XV Partners, are among the Indian startups developing AI models. In 2024, AI startups raised $1.2 billion in funding, showcasing the sector's robust investment appeal.

Future Prospects for AI in India

Gaurav Kothari of Prosus believes that AI will continue to dominate startup funding in 2025, especially for companies demonstrating strong traction and product-market fit. Sandeep Murthy of Lightbox India Advisors is keen on investing in consumer tech startups leveraging AI effectively, viewing AI as central to the investment thesis of tech-focused funds.