GenAI start-up landscape witness broad-based growth, crosses 240 in H1 2024

Net funding addition of $152 million since H1 CY2023, cumulative funding grows over $750 million since 2023, according to Nasscom report

India's Generative AI (GenAI) startup ecosystem has evolved significantly in the past 18 months, marked by a surge of innovative product launches redefining the industry landscape. Since the second half of 2023, a diverse array of homegrown GenAI startups—including Krutrim, Sarvam.ai, Nurix, and ZekoAI—spanning infrastructure, services, and applications, have emerged.

India’s GenAI ecosystem has witnessed strong, broad-based growth, with the total number of GenAI startups surging 3.6 times, from over 66 in the first half of CY2023 to more than 240 by the first half of 2024, according to a report by IT trade body Nasscom. The report is based on insights from over 110 startup interviews and research on more than 240 active GenAI startups.

 

This growth has been driven by the launch of 17 native GenAI language models in India and a 4.6 times increase in GenAI services. There has also been a notable rise in the number of startups offering GenAI assistants, comprising nearly 80 per cent of newly added startups over the past year. Despite an early-stage focus, India’s GenAI startups have attracted over $750 million in cumulative funding since 2023. In H1 CY2024, 75 per cent of startups were generating revenue, up significantly from 22 per cent in H1 CY2023. India now ranks 6th globally among major economies in terms of GenAI startup ecosystems.

“Over the past 12 months, India's Generative AI landscape has undergone a seismic transformation, with a wave of innovative product launches redefining industry standards and highlighting new focus areas such as managed large language models (LLMs) and data-driven services,” said Sangeeta Gupta, senior vice president and chief strategy officer, Nasscom. “We must prioritise funding for high-potential GenAI startups and focus on attracting and developing top-tier AI talent,” she added.

Indian GenAI startups are also demonstrating quick adaptability in their technology choices and market focus. Some 43 per cent of GenAI startups now leverage a hybrid approach, combining both closed and open-source models for their solutions. This adaptability has supported growth across all three major segments of GenAI: infrastructure, applications, and services. Productivity-enhancing applications, such as coding companions and workflow augmentation tools, have received twice as much funding, with 45 startups catering to this GenAI theme, up from 20 in H1 CY2023. GenAI assistants have grown fourfold to over 130 startups. Many of these have pivoted from traditional AI-based chatbots to GenAI-enabled conversational bots or virtual assistants. In the services segment, three key concepts have emerged: GenAI-as-a-service, enterprise platforms, and data-as-a-service, though funding remains concentrated on 2-3 startups.

Nearly 70 per cent of surveyed GenAI startups are expanding their offerings by delivering industry-specific solutions across sectors such as IT and communications, retail, healthcare, banking, financial services and insurance (BFSI), education, and media and entertainment. Bengaluru remains the leading GenAI startup hub in India, housing 43 per cent of all startups. However, emerging hubs like Ahmedabad, Lucknow, Surat, and Kolkata are expanding quickly, now representing 18 per cent of the ecosystem.

While the GenAI startup landscape is growing, it faces significant challenges, including a lack of patient capital, limited compute capacity that affects scalability beyond proofs of concept (PoCs), and customer hesitation, according to Nasscom. There is also a shortage of skilled AI talent. Although concerns around high-quality training data and responsible AI have lessened compared to 2023, client reticence due to regulatory and trust issues remains a significant barrier.

Gaining ground

> GenAI startups surged from over 66 in the first half of CY2023 to over 240 in the first half of 2024

> Growth majorly fueled by launch of 17 native GenAI language models in India

> These have attracted over $750 million in cumulative funding since 2023, with 75 per cent startups in H1 CY2024 now generating revenue

> India ranks 6th globally in the share of GenAI startup ecosystems among major economies