India's GenAI Startups Attract Cumulative Funding of over $750 Million Since 2023: Nasscom The total number of GenAI startups surged 3.6 times, from over 66 in the first half of CY23 to more than 240 by the first half of 2024.

With an early-stage focus, India's generative AI (GenAI) startups have attracted over US$750 million in cumulative funding since 2023, with 75 per cent startups in H1 CY24 now generating revenue, a significant jump from 22 per cent in H1 CY23, according to the latest report titled 'India's Generative AI Startup Landscape 2024', released in Bengaluru on Wednesday at the Nasscom Future Forge event.

Ranked 6th globally in the share of GenAI startup ecosystems among major economies, India's GenAI ecosystem has witnessed strong, broad-based growth. The total number of GenAI startups surged 3.6 times, from over 66 in the first half of CY23 to more than 240 by the first half of 2024. This growth is majorly fuelled by the launch of 17 native GenAI language models in India, a 4.6 times surge in GenAI services, and a significant increase in the number of startups offering GenAI assistants comprising nearly 80 per cent of newly added startups over the year.

The past 18 months has seen a surge of innovative product launches that are redefining the industry landscape. Since the second half of 2023 in particular, a diverse array of homegrown GenAI startups, such as Krutrim, Sarvam.ai, Nurix, ZekoAI, among others, spanning infrastructure, services, and applications, have emerged.

The report revealed that Indian GenAI startups are also demonstrating quick adaptability in their technology choices and market focus. 43 per cent of GenAI startups now leverage a hybrid approach, combining both closed and open-source models for their solutions. This adaptability has helped growth across all three major segments of GenAI – infrastructure, applications, and services.

Productivity-enhancing applications, such as coding companions and workflow augmentation tools, have gotten 2 times more funding with 45 startups catering to this GenAI theme, up from 20 in H1 CY23. GenAI assistants have grown 4 times to over 130 startups, many of which 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 to 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 & communications, retail, healthcare, BFSI, education, and media & entertainment.

Geographically, while Bengaluru remains the leading GenAI startup hub in India, housing 43 per cent of all startups, emerging hubs like Ahmedabad, Lucknow, Surat, and Kolkata are growing quickly, now representing 18 per cent of the ecosystem. Notably, there are no significant differences in business models or tech stack choices between startups in established hubs and those in these emerging regions, indicating a nationwide spread of innovation.

Speaking on the potential of India's burgeoning GenAI startup landscape, Sangeeta Gupta, Senior Vice President and Chief Strategy Officer, Nasscom, said, "Over the past 12 months, India's GenAI landscape has undergone a seismic transformation, with a wave of innovative product launches redefining industry standards and highlighting new focus areas such as managed LLMs and data-driven services. Achieving this progress requires a collective effort centered on rapid co-innovation within a nurturing ecosystem.

"We must prioritize funding for high-potential GenAI startups and focus on attracting and developing top-tier AI talent. Equally crucial is building trust in AI systems by implementing strong responsible AI frameworks. Through collaboration, we can unlock the full potential of GenAI and position India as a global leader in this technological revolution," she added.

While the GenAI startup landscape is growing, it faces significant challenges, including lack of patient capital, limited compute capacity hurting scalability of enterprise GenAI beyond proof-of-concepts (PoCs), customer hesitation, and a shortage of skilled AI talent. While concerns around high-quality training data and responsible AI have diminished compared to 2023, client reticence due to regulatory and trust issues remains significant.

To position India as a global GenAI leader, the ecosystem must foster rapid co-innovation. Startups should aggressively experiment, co-innovate with industry partners, and establish early partnerships with industry, almost at the stage of minimum viable product (MVP), to get access to deployed expert AI talent, and academia for internship-led access to fresh graduates, the report said.