BENGALURU: The country's Generative Artificial Intelligence (Gen AI) start-ups have attracted more than 750 million dollars in cumulative funding since 2023.
Many homegrown Gen AI start-ups have emerged in recent times and the total number of start-ups has surged 3.6 times from over 66 in the first half of CY 2023 to more than 240 by the first half of 2024. Of the total funding, net funding addition alone is over 152 million dollars since H1 CY2023.
Nasscom on Wednesday launched India's Generative AI Startup Landscape 2024 report which reveals that the growth is fueled by the launch of 17 native Gen AI language models in India, a 4.6X surge in Gen AI services and also due to an increase in the number of start-ups offering Gen AI assistants that comprise nearly 80 per cent of newly added start-ups over the year.
With 43 per cent of overall start-ups emerging from Bengaluru, the city is the leading Gen AI start-up hub in India, emerging hubs like Ahmedabad, Lucknow, Surat, and Kolkata are growing quickly, as they represent 18 per cent of the ecosystem.
Since the second half of 2023, start-ups such as Krutrim, Sarvam.ai and ZekoAI, among others, have emerged, and today, the country ranks sixth globally in the share of Gen AI start-up ecosystems among major economies.
About 75 per cent of start-ups in H1 CY2024 are now generating revenue, which is a significant jump from 22 per cent in H1 CY2023.
Sangeeta Gupta, Senior Vice President and Chief Strategy Officer, Nasscom, said, “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 LLMs and data-driven services."
She added, "We must prioritize funding for high-potential Gen AI start-ups 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.”
About 70 per cent of surveyed Gen AI start-ups are expanding their offerings by delivering industry-specific solutions across sectors such as IT & communications, retail, healthcare, BFSI, education, and media & entertainment.
The report pointed out that there are no significant differences in business models or tech stack choices between start-ups in established hubs
and those in these emerging regions, indicating a nationwide spread of innovation.
Interestingly, according to the report, about 43 per cent of Gen AI start-ups now leverage a hybrid approach, combining both closed and open-source models for their solutions. Productivity-enhancing applications, such as coding companions and workflow augmentation tools, have secured 2x more funding with 45 start-ups catering to this Gen AI theme, up from 20 in H1 CY2023.
Gen AI assistants have grown 4x to over 130 start-ups, many of which have pivoted from traditional AI-based chatbots to GenAI-enabled conversational bots or virtual assistants.
The report also highlights significant challenges including lack of patient capital, limited compute capacity hurting the scalability of enterprise Gen AI beyond Proof of Concepts (PoCs), customer hesitation and a shortage of skilled AI talent.
However, concerns around high-quality training data and responsible AI have diminished compared to 2023, and client reticence due to regulatory and trust issues remains significant. It suggests that start-ups should aggressively experiment, co-innovate with industry partners, and establish early partnerships with the industry, almost at the stage of MVP (minimum viable product), to get access to deployed expert AI talent, and academia for internship-led access to fresh graduates.