Indian AI Startup Funding: A Tale of Two Quarters in 2024

Indian AI startups funding dips 10% to $125 million in July-September period

Indian AI startup funding dipped 10% this quarter and 50% year-on-year, reaching $125 million across 31 deals. While funding sizes shrank, deal volume surged, signaling sustained investor interest in AI's potential. Experts predict larger funding rounds will return in 2025 as market stability improves and AI startups demonstrate stronger ROI.Artificial intelligence (AI) startup funding in India saw a 10% quarter-on-quarter dip in the July-September period and a 50% fall year-on-year, data sourced by ET from market tracker Venture Intelligence showed. Funding stood at $125 million, with 31 deals. The number of deals saw a 55% increase quarter-on-quarter and a 72% increase year-on-year, with most of the top-funded AI startups being in the enterprise software segment. Some of the largest deals of the quarter included Mukesh Bansal-founded enterprise AI assistant-maker Nurix AI ($28 million), industrial operations optimisation startup Uptime AI ($14 million), data analytics SaaS startup e6data ($10 million) and AI-powered human resources platform Vahan ($10 million). Experts said the significant increase in the number of deals indicates that investor interest in AI remains strong, but that funding sizes are being recalibrated as market volatility impacts valuations. In 2025, larger funding rounds could resume as investor confidence stabilises and AI startups demonstrate stronger returns on investment, they said. "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," said Vikram Gupta, managing partner, IvyCap Ventures. "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 added that the January-March quarter in 2025 might see slightly higher investments, particularly driven by dollar capital from the US now that the uncertainty preceding the US presidential elections has alleviated. "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," said Abhishek Prasad, managing partner, Cornerstone Venture Partners. As companies move beyond early-stage experimentation, they are finding ways to integrate AI into their value propositions and operations, Prasad said, adding that this maturation of AI investments will drive a shift from hype-driven funding to more sustainable investments based on real metrics such as operational efficiency, customer acquisition and scalability, creating promising funding opportunities for AI startups that can deliver measurable ROI. Rahul Agarwalla, managing partner at AI-focused fund SenseAI Ventures, said that the growth in number of deals is a healthy sign indicating that the number of quality AI startups is increasing. "It is a better metric as it does not get skewed by a few large investment rounds," he said. "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." The numbers should be read in the context of large ticket size investments that flowed into the foundational models companies during 2023, while 2024 funding has marked a shift towards developer tools and AI applications which require smaller initial round sizes and infrastructure layout, said Somshubhro Pal Choudhury, partner, Bharat Innovation Fund. Deepak Sharma, managing partner at seed-stage startup accelerator India Accelerator, said AI applications in enterprise software, healthcare, fintech and legal are likely to see sustained interest as companies seek solutions for efficiency, data insights and automation. The evolving regulatory environment, enterprise security considerations and AI adoption among enterprises will be key drivers, he said. "India's AI startup ecosystem has shown exceptional resilience and adaptability, even amid shifting funding trends," said Kritika Murugesan, senior director - deep tech and startups at industry body Nasscom, adding that a positive funding trajectory is anticipated in 2025. Murugesan said that between the first half of 2023 and the first half of 2024, India's share globally in the number of GenAI startups doubled, underscoring the country's role as a hub for AI-driven advancements across the AI stack - models, enterprise platforms, productivity tools and industry-specific solutions.

Generative AI funding in India soars 6x in Q2 FY25: report

Total funding grew 3.4 times year-on-year, boosted by investments in enterprise applications and agentic AI. The number of funding rounds grew three times, with early-stage investments accounting for 77% of all rounds, including angel and seed funding.Funding for Generative artificial intelligence in India increased six times on a sequential basis in the second quarter of fiscal 2025, primarily driven by investments in B2B platforms and productivity solutions, according to a report by technology industry body Nasscom. The quarter saw a record 20 funding rounds, indicating recovery after a sluggish first quarter, the report found. Total funding grew 3.4 times year-on-year, boosted by investments in enterprise applications and agentic AI. The number of funding rounds grew three times, with early-stage investments accounting for 77% of all rounds, including angel and seed funding. The report found a 25% increase in partnerships quarter-on-quarter, focused on product enhancements, joint go-to-market strategies, and government-led skilling initiatives. It highlighted sustained growth in technology providers' GenAI activities, with a shift from building use case portfolios to converting active proofs-of-concepts (PoC) into production-ready solutions. The active PoCs and production use cases boosted the GenAI revenue pipeline with stronger realisations reported, it said. The report also said that talent strategies have transitioned from basic AI literacy to advanced and thematic upskilling, emphasising platform integration and agentic AI capabilities. "India has strengthened its position in the global Generative AI (GenAI) landscape, ranking 6th among major economies in the share of GenAI startup ecosystem," Nasscom said in a statement. "The country's GenAI ecosystem has demonstrated strong and broad-based growth, with significant advancements in innovation, funding, and talent development." It noted that since the first half of 2024, innovative startups such as Nurix AI, Dashtoon, and Mihup have led the way with transformative solutions in workflow management, digital comic creation, and conversational analytics for contact centres. Further, the increasing maturity of the Indian GenAI ecosystem reflects its transition from exploratory use cases to scalable, production-ready solutions, Nasscom said. It added that this growth is fuelled by improving funding inflows, rising revenue realisations, and expanding applications in enterprise productivity and customer engagement.