Indian startups noticed decreased deal sizes and less funding in comparison to 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% as it went 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. 

Even though the drop may seem terrible because of big 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 fundsraised by these startups are continuously decreasing.  It went half in a year, from $14.7 million to $7.1 million in 2023. We saw a slight increase in 2024 and  it went up to $10.6 million as of May 3. 

Image source: Wikipedia 

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, there’s a lot of them are failing. These startups once had a lot of money invested in them.  But now more than half of these new startups don’t work out. So getting funds from govt. is also a bit  risky. But to get over continuous failure and the decrease in size of the AI startup in the last year, Govt.  of India launched the IndiaAI Mission. This is a comprehensive national-level program to democratize  and boost up the AI innovation ecosystem in the country 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 in securing investments,  with only $31.9 million raised since the start of the year. However, despite this decline, global AI startup  funding saw an increase, reaching $50 billion in 2023, with $12.2 billion raised in the first quarter alone.  In India, while funding sizes decreased, 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.