Funding for startups on the rise in India

Bengaluru: Overall funding environment is getting better by the day in the Indian startup ecosystem with a possibility of continuance of the trend in coming quarters.

Fund managers are betting big on the AI (artificial intelligence) wave that has accelerated post the advent of Generative AI tools like ChatGPT.

“There are signs that the overall funding environment is getting better, albeit slowly. In the absence of any new geopolitical or macro adverse events, this should hopefully get better from here. Post the launch of ChatGPT, GenAI-driven business models have caught the attention of investors everywhere,” Partner at PE fund, Siana Capital Management, Dinesh Goel told BizzBuzz.

He said that PE & VC funds are increasingly investing in AI-powered startups on the back of huge potential of the new technology domain.

“It is expected that narrow use cases of LLM (Large Language Model) will help transform several industries and niche areas as the precision will be much higher. For instance, for software development lifecycle, LLM models are already making a huge difference via CoPilot, Tabnine and other similar companies. In general, AI is a big wave that will continue to disrupt industries in terms of enhancing their productivity via automation and efficiency for many years,” Goel added.

Funding inflow into domestic startups improved in February of this year after a blip in January. The funding raised by Indian startups zoomed 43 per cent month-on-month to $734 million in February 2024. Similarly, the number of funding deals also increased to 83 last month from 68 in January.

Last month, ecommerce companies secured the lion’s share of funding, totaling $149 million, while fintech startups raised $56 million.Enterprise tech was the second most funded segment with a total fund raise of $111 million across nine deals during February.

In recent time, AI-powered startups have led the funding rounds as investors get more confidence about their growth potential. Especially, Generative AI (GenAI) startups have bucked the trend, raising a record $10 billion in 2023, according to a report by GlobalData. This marks a 110 per cent increase compared to 2021.

Last month, Krutrim, an artificial intelligence (AI) venture co-founded by Bhavish Aggarwal of Ola, achieved unicorn status after raising $50 million from notable investors, such as Matrix Partners India. Unicorn is a company whose valuation touches $1 billion or more.

Fund managers are of the opinion that given the potential of Gen AI-led startups, interest level on this segment is expected to remain high in 2024.