Indian startups noticed decreased deal sizes and less funding than the past few years. According to data set by research agency Tracxn, the total startup funding for AI startups had a sharp drop of 71%, going from $599 million to $168.4 million in a year. Since the start of this year, startups have only managed to gain $31.9 million, according to a report by Business Standard. We are discussing The Big Drop in Indian AI Startup Funding.
Even though the drop may seem terrible because of the large numbers outside India and in global terms, AI startups have done significantly well. AI startups worldwide had an increase in comparison. According to Cruchbase, AI Startups worldwide went from $45.8 Billion to $50 Billion in a year. In addition, the first funding was $12.2 Billion for 2024 (first quarter only).
The size decrease in AI startups can be seen as a good point from the POV of those who lost their jobs cause of these automated works. According to McKinsey, half of the work will be based on AI by 2060, and generative AI can add up to $4.4 trillion in the Global economy. In India, the sizes of funds these startups raise are continuously decreasing. It went half a year, from $14.7 million to $7.1 million in 2023. We saw a slight increase in 2024, up to $10.6 million as of May 3.
According to a report by Tracxn, the startup funding for these AI Startups went down by 57%. The funding continued to be slow till last year. The main reason behind less funding for these AI startups is that lately, many of them are failing. These startups once had a lot of money invested in them. But over half of these new startups don’t work out now. So, getting funds from govt.
It is also a bit risky. However, to overcome continuous failure and the decrease in the size of AI startups in the last year, the government of India launched the IndiaAI Mission. This comprehensive national-level program will democratize and boost the country’s AI innovation ecosystem and ensure the global competitiveness of India’s AI startups and researchers.
The Mission of this program is to establish a robust AI ecosystem through strategic programs and partnerships across the public and private sectors. By granting computing access, improving data quality, developing AI capabilities, attracting top AI talent, enabling industry collaboration, providing startup risk capital, and ensuring socially impactful AI projects, it aims to provide a boost to India’s AI ecosystem. The Mission will be led by ‘IndiaAI Independent Business Division (IBD) under Digital India Corporation (DIC) and offers scaling Capacity, an Innovation Centre, a Datasets Platform, an Application Development Initiative, IndiaAI Startup Financing, and more.
Conclusion
The significant decline in funding for Indian AI startups in 2023 reflects a challenging landscape for these businesses. With total funding drop by 71%, startups faced difficulties securing investments, with only $31.9 million raised since the start of the year. However, global AI startup funding increased despite this decline, reaching $50 billion in 2023, with $12.2 billion raised in the first quarter alone. While funding sizes have decreased in India, initiatives like the IndiaAI Mission aim to rejuvenate the ecosystem by providing support, resources, and funding opportunities. Led by the IndiaAI Independent Business Division, this comprehensive program seeks to boost India’s AI innovation ecosystem and ensure its global competitiveness through strategic partnerships and initiatives.
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