India’s venture capital space is undergoing a reality check when it comes to artificial intelligence (AI) investments. AI was the darling of the tech investment world just a few years ago and investors were quick to fund startups promising innovative solutions. The frenzy is fading today and investors are pulling back or requiring AI ventures to demonstrate real value. It is clear that the initial hype is phasing out and truly the strongest will survive.
Adith Podhar, General Partner at Gemba Capital, observed a sobering shift as the days of easy money flowing into AI startups are numbered. It is a demand that is proving challenging for some and it is evident by the recent closures of some AI-focused startups including Toplyne, Nintee and InsurStaq.ai.
The cautious approach signals an evolution and Abhishek Prasad, Managing Partner at Cornerstone Ventures, said that investors are now directing funds toward AI applications with the potential to deliver substantial value as well as favoring targeted sectors over broad-spectrum AI hype.
Some areas within AI are attractive such as Generative AI that is still enjoying the interest of investors and its valuations will continue to rise compared to non-AI tech firms. Podhar said that seed-stage AI startups are currently valued about 20% higher than their counterparts and it is jumping to 59% at Series B.
There is an increasing focus on models that blend AI with human collaboration and not attempting to replace human roles entirely.
The Indian AI market is still brimming with potential and is projected to grow to $17 billion by 2027. However, the days of unbridled enthusiasm are over. AI startups must now step up and move beyond the buzzwords as well as proving their real-world impact.
