Everyone from tech enthusiasts to investors is feeling the heat as India’s AI industry heats up. It appears like the nation is on the verge of an AI revolution as AI entrepreneurs are generating news, attracting capital, and releasing cutting-edge technologies. However, as they say, not everything that glitters is gold. Though it’s exciting to imagine India giving birth to 100 AI unicorns within the next ten years, it’s important to consider if this is an attainable objective or just wishful thinking.
Realities vs. HypesSense
AI Ventures managing partner Rahul Agarwalla is upbeat. He noted in a recent podcast that more than 500 AI startups had emerged in the last six months alone. That is an astounding figure that says a lot about the innovation that is surfacing in the nation. In the next ten years, Agarwalla predicts that India will witness about 100 AI unicorns. It sounds inspiring, doesn’t it? But wait, let’s not get ahead of ourselves.
The truth is that, although the AI ecosystem in India is flourishing, venture funding is still not the main driving force behind it; instead, jugaad—a term that roughly translates to creative remedies or workarounds—is still important. Instead of developing
ground-breaking technologies, a large number of AI firms in India are more concerned with making use of already-existing infrastructure or developing straightforward applications on top of others. This is where doubt enters the picture. Are we just beginning to scratch the surface of AI innovation, or can India genuinely become a powerhouse?
The Revolution’s Formative Years
Arjun Rao, a Speciale Invest partner, injects some groundedness into the conversation. While he believes that India can develop great AI startups, he is cautious about making strong forecasts. We are definitely only at the beginning of this AI revolution, according to Rao. “We’ll advance every year, but along the way, we’ll need to iterate and find solutions to issues.” Put another way, it’s not a sprint but a marathon.
This cautious optimism is supported by the data. AIM Research reports that in 2024, Indian AI startups raised $560 million in 25 rounds, a notable 49.4% decrease from the year before. Global AI startups, however, have raised around $27 billion in just three months of this year. The glaring disparity begs significant concerns about India’s position in the global AI scene.
The Rising of the Soonicorns
AI continues to be a popular issue among investors despite the decline in financing. About half of Stellaris Venture Partners’ investments over the past year have gone to AI-first firms, according to partner Alok Goyal. However, Goyal provides a warning, saying that one should exercise caution when interpreting the data surrounding AI investments. “To varying degrees, almost every new startup is utilizing AI today, much like the cloud,” he claims.
This leads us to the idea of startups that are poised to become unicorns, or “soonicorns.” The rise of soonicorns is a more concrete result, even though the goal of creating 100 AI unicorns in the next ten years may seem lofty. Slowly but surely, startups such as Sarvam AI, Krutrim, TWO.AI, and Project Indus are leaving their imprint. However, these soonicorns require more than simply innovation to become unicorns; they also require finance, skill, and scalability.
The Financial Aspect: The Unicorn Dream and Dry Powder
The good news is that there is no problem with capital availability. Peak XV Partners managing partner Rajan Anandan recently noted that the Indian VC industry has $20 billion available to invest in businesses, with artificial intelligence being the most important topic. Anandan thinks India has a lot of room to expand and innovate, and that it might have a big influence on the AI world.
Another venture capital firm, Antler, recently declared that it would invest $10 million in early-stage AI businesses in India. Antler partner Rajiv Srivatsa stressed that “RIGHT NOW is the best time to build a startup in India!” The ecosystem appears ready for expansion, with IT behemoths like Google, NVIDIA, and JioGenNext offering incubators and startup programs.
However, things aren’t always easy. More than ever, investors are being cautious and meticulously examining firms, often posing extensive questions during pitches. The days of VCs funding AI businesses without a well-defined thesis are long gone. They are now more knowledgeable but risk averse, which presents a challenge and an opportunity for companies to differentiate themselves.
The Way Ahead: Rocketship or Reality Check?
What does the AI ecosystem in India have in store for the future? Although it’s a lofty goal, creating 100 AI unicorns isn’t totally unattainable. How these firms develop—whether they can go beyond jugaad, obtain substantial finance, and develop fundamental AI solutions that can be scaled internationally—will be crucial.
India has the market, the talent, and the money right now to realize this ambition. There will be winners and losers, though, just like in any gold rush. The companies to keep an eye on are those who can successfully negotiate the challenges posed by the AI landscape, draw in elite talent, and obtain long-term funding.
Ultimately, the AI ecosystem in India is still developing, with a lot of promise but also a lot of obstacles. It remains to be seen if it will give birth to a hundred unicorns or a few notable success stories. But one thing is certain: everyone will be eagerly watching as AI in India takes a wild trip over the next ten years, from investors to entrepreneurs.
