India’s AI startups on the rise

Have a startup idea but worried about funding? While 2024 saw a slight dip in funding activity, India remains the world’s third-largest startup ecosystem, with a steady annual growth rate of 12-15%. Challenges like limited access to advanced computing and a shortage of skilled talent persist, but on National Startup Day, entrepreneurs are optimistic, believing Indian startups are moving in the right direction.

Anurag Gupta and Rajeev Tiwari, Co-Founders of Stemrobo, candidly acknowledged that nearly 90% of startups in India fail within their first year. “This usually happens because of problems like not understanding what the market wants, not having enough money, or poor management. Many startups launch products without properly checking if there’s a real demand for them, which leads to low sales. Also, not having enough funding makes it hard to grow or even keep the business running, and inexperienced leaders often make poor decisions that slow down progress,” they said. Poorly defined business models, often lacking clarity on revenue generation and scalability, further hinder growth, with startups failing due to unsustainable strategies, said Rahul Subramaniam, Co-founder, Athena Education.

Mukul Goyal, Co-Founder of Stratefix Consulting, mentioned how entrepreneurs must ensure their products meet market demands through research and customer validation if they want their product to succeed. “Startups must remain adaptable, embracing market feedback and pivoting strategies as needed. Financial discipline and transparent dealings are critical for building trust with investors,” he said.

In India, the AI startup ecosystem is tackling key challenges faced by both businesses and consumers. The widespread adoption of AI and cognitive technologies across industries is projected to boost global AI sector revenues to an impressive USD 190.61 billion by 2025. In 2024, a study by SAP India and Dun & Bradstreet highlighted how Indian startups are harnessing advanced technologies to maximise their potential. The report revealed that over 77% of startups have invested in cutting-edge solutions like AI, ML, IoT, and blockchain.

Subramaniam said India’s AI startup ecosystem has rapidly expanded, with approximately 6,200 active startups as of early 2024, solidifying the nation’s position as a global hub for innovation. “The Generative AI sector has surged by 260% year-on-year, marking extraordinary growth. This expansion has positioned India as the sixth largest global hub for Generative AI,” he said.

Sumit Shukla, CEO, Scholars Merit informed how industries like agriculture and healthcare are beginning to explore AI to solve complex challenges. However, the sector still faces hurdles like a shortage of skilled professionals and the high costs of developing AI-driven solutions, he said. “As more programmes focus on building AI skills and innovation is encouraged through incentives, the ecosystem is expected to grow rapidly in the next five to seven years, especially in Tier 2 and Tier 3 cities, where there’s untapped potential,” said Shukla.

Arpit Mittal, Founder and CEO, SpeakX pointed out that the AI startup ecosystem in India is “vibrant” but “still maturing”. According to him, startups focused on AI-driven solutions in niche areas like education and personalised learning are gaining traction. “To accelerate growth, widespread adoption of AI in rural sectors and small enterprises is critical. With increased investments, government initiatives, and better awareness among businesses about AI’s potential, I anticipate a significant boom in the sector within the next three to four years,” he said.

For Gupta and Tiwari, government initiatives like Digital India have played a pivotal role in driving the growth of the country’s AI startup ecosystem. “As of April 2024, there are approximately 6,200 AI startups in India, with 29 having reached Series D or higher funding stages,” they said.

Goyal commended the government’s support, emphasising that the sector is poised for remarkable growth between 2025 and 2030, largely fueled by increased enterprise adoption of AI and the strategic initiatives like the Digital India Programme. “According to a NASSCOM report, the AI market in India is expected to add $500 billion to the economy by 2030,” he said.