Total funding for Indian AI startups saw more than 71% dip in 2023: Report 

Indian startups are feeling the heat due to drying funds and decreasing deal sizes. Venture capital (VC) and private equity (PE) funding for Indian startups in the artificial intelligence (AI) sector has seen a significant fall as deal sizes have been shrinking.

A data set of research agency Traxcn highlighted that the total funding for AI startups in India, which started with a bang in 2022 at $599 million, dropped sharply in 2023 to $168.4 million, a dip of almost 71 per cent. Since January 2024, startups have only managed to garner $31.9 million in three rounds, a report by Business Standard stated.

But in global terms, AI startups have done significantly well. According to Crunchbase, AI startups worldwide raised $50 billion in 2023, up from $45.8 billion in 2022. In the first quarter of 2024, total AI funding stood at $12.2 billion.

In India, the size of the funds raised by AI startups is shrinking. In 2022, the average deal size was $14.7 million, but it dropped to $7.1 million in 2023; it has slightly increased in 2024 (until May 3) to $10.6 million.

In 2023, the biggest fundraisers were significantly smaller. The largest amount raised was by Krutim, an AI venture founded by Bhavish Aggarwal. It raised $50 million from Matrix Partners and achieved a valuation of $1 billion. The next significant fundraising was by Sarvam AI, which raised $41 million. The investors included Lightspeed Venture Partners and WestBridge Capital, among others. The company is developing efficient large language models, which will enable new AI applications through enterprise models.

According to McKinsey, half of the world's work will be significantly automated by 2060, and generative AI could contribute $4.4 trillion annually to the global economy.

In another report, Tracxn said funding among Indian fintech startups surged 59 per cent quarter-on-quarter (Q-o-Q) to $551 million in the first quarter (Q1) of calendar year (CY) 2024, up from $346 million in the previous quarter. On a year-on-year (Y-o-Y) basis, the funding continued to be slow. On a Y-o-Y basis, funding was down 57 per cent from the $1.3 billion fintech startups raised in the year-ago period.