 "Volatile market, policy issues cause a drop in India's AI startup funding")
In the April to June quarter, funding for AI startups in India reached $8.2 million, representing a significant decline of approximately 91 per cent from the previous quarter and 82 per cent from the same period last year, The Economic Times reported citing data from market tracking firm Tracxn.
This follows nearly 110 per cent sequential increase in funding in the preceding quarter and a 56 per cent rise in the quarter ending December 2023, the report claimed.
It further included equity funding for AI infrastructure and AI-as-a-service technology startups. The substantial decrease in funding primarily to the highly volatile market, which is influenced by geopolitical tensions and rising interest rates, among other factors, the business-daily cited Neha Singh, co-founder of Tracxn, as saying. She also expressed anticipation for growth in the sector once the market stabilises.
In the June quarter, AI startups comprised only about 0.3 per cent of the total tech startup funding, which amounted to roughly $3 billion. However, globally, AI startups have been resisting the ‘funding winter’ affecting startups post-pandemic, the report added. In the United States, for instance, AI startups secured $27 billion in funding from April to June, accounting for nearly half of all startup funding in the country during that period, according to The New York Times, citing data from Pitchbook.
For the first time, AI startups emerged as the largest segment during that quarter, according to Crunchbase.
Investors pull back amid uncertainty
So far this year, Indian AI startups have raised nearly $96 million, marking a 61 per cent increase over the same period in 2023, but an 82 per cent decrease compared to the first half of 2022, when AI funding peaked at $560 million for the entire year. In India, investors are pulling back after initial excitement around AI technology, due to the absence of clear, profitable use cases amidst a fragmented investment landscape with numerous AI startups, the business-daily cited industry experts as saying.
Moreover, enterprise demand is subdued due to uncertainty regarding investment priorities and the costs associated with scaling AI solutions.
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Surge in AI-startup funding in the US
In contrast, according to a recent Reuters report, investments in AI startups in the US surged to $24 billion from April to June, more than doubling from the previous quarter, based on data from Crunchbase, indicating a growing interest in AI technology.
Overall, startup funding increased by 16 per cent sequentially, reaching $79 billion in the last quarter, mainly driven by investments in AI, which became the largest sector for the first time, followed by healthcare and biotech.
Among the major funding rounds, five out of six billion-dollar rounds were secured by AI companies. Notable deals included Elon Musk’s xAI raising $6 billion and AI infrastructure provider CoreWeave securing $1.1 billion. Other significant deals included automated driving company Wayve and data preparation company Scale AI. Outside the AI sector, cybersecurity company Wiz raised $1 billion in its latest funding round.