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Generative AI Startup Landscape in India – A 2023 Perspective

As of May 2023, the Indian Generative AI landscape had more than 60 startups dedicated to offering solutions and services to their customers spread across various industry verticals. More than $590 million in funding has already flown into this space, with 2022 being the year with the heaviest funding inflow. This study, Generative AI Startup Landscape in India – A 2023 Perspective, reflects nasscom’s perspective on this evolving space. The study outlines the market composition, funding environment, technological environment, value creation across use cases, and revenue trends/expectations reported by the Gen AI startups in India. Also included are nasscom’s recommendations to various ecosystem players on what they can do to create a favourable environment that facilitates large-scale Generative AI potential unlock and promotes market growth.

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Key Findings

Generative AI is a gradual shift from ANI towards AG
  • Gen AI is a leap from task-centric (ANI) to data-centric, and from no self-awareness (ANI) to self-awarenes
  • The technology has a very packed timeline as companies continue to demonstrate their offensive competitive strategy
  • Enterprise adoption of Gen AI lags but B2C adoption continues to gain momentum
Global Gen AI investments 3% of the overall AI investment
  • More than $19 billion investments committed to Gen AI till date
  • Deal volume stabilized in 2022, though per deal funding grew by more than 40% during 2021-22
  • Combined enterprise value of 100 key generative AI companies in January 2023 marked a 7x increase from 2019.
  • In 2021-22, although the number of Gen AI deals in visual media category were almost 21% more than those in text category, total value of deals in text stood higher than that in visual media.
Indian Gen AI investments grew 12X y-o-y in 2022
  • The number of Gen AI startups in India more than doubled between 2021 and 2023 till date
  • Nearly 70% of all private investments into the Indian Gen AI space flowed in 2022.
  • Around three-fourths of the startups are Gen AI-native preferring to build their solutions in-house
  • 30% of the Gen AI startups raised funding in 2022 with institutional investors accounting for around 70% of the deal volume.
  • A significant proportion of Gen AI startups are using closed-source generative models with a high degree of inclination towards non-relational databases and custom visualization tools.
Lack of funding a big challenge for Indian Gen AI startups
  • Despite having the highest penetration of AI talent, India lags many of the major tech hubs in the world in the Gen AI race
  • Lack of high-quality training data, funding, and compute infrastructure are three of the major challenges for startups.
  • Execution of nasscom’s recommendations to grow the Gen AI ecosystem will have to be at pace with the Gen AI evolution in the global landscape

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