A recent evaluation of 849 AI start-ups by VC fund SenseAI reveals that India produces very few AI infrastructure and foundational start-ups, comprising only 3 per cent of the total surveyed. AI infrastructure refers to the hardware and software needed to create and deploy AI-powered applications and solutions.
SenseAI Ventures’ report stated that AI applications and AI tooling start-ups together account for over 90 per cent of Indian AI funding. Among the AI application ventures, Enterprise Software as a Service (SaaS) (45 per cent) leads as the largest category, highlighting India’s success in the B2B AI software space. Generative AI (GenAI) has also simplified content creation, with media and gaming emerging as the second most popular category. AI Tooling, often described as the “picks and shovels” of the AI gold rush, contributes 22 per cent of start-ups, indicating Indian founders’ understanding of AI challenges and their skills in problem-solving.
AI application start-ups attract investors
Application-focused start-ups also lead significantly in terms of funding. They received around $1 billion in funding, with approximately 220 companies in this category. This highlights the market’s strong emphasis on AI applications over other types. Infrastructure start-ups garnered around $200 million in funding and foundational start-ups secured around $100 million in funding. This is in stark contrast to the US, where 90 per cent of capital flows into Infrastructure and foundational AI. AI Tooling start-ups received approximately $150 million in funding.
Bengaluru leads
Bengaluru has emerged as the AI capital of India, attracting over 40 per cent of all funding at around $650 million. Bengaluru also hosts the highest number of AI start-ups, with around 100 companies. The National Capital Region (NCR) ranks second with about $300 million in funding. It supports nearly 90 companies, indicating that while NCR has fewer start-ups than Bengaluru, it still garners substantial investments. Mumbai lags behind with approximately $250 million in funding. It also has the lowest number of AI start-ups among the cities listed, with around 30 companies. Other cities encompassing smaller cities and emerging hubs, raised about $350 million.
Funding by sectors
Enterprise SaaS dominates sector funding with 21.3 per cent of the total. This reflects the strong market for software solutions tailored for enterprises. Infrastructure and logistics secures 18.6 per cent of funding, indicating robust interest in improving operational efficiencies and supply chains. Fintech follows closely with 18.5 per cent, showcasing continuous growth and innovation in financial services and technologies.