A recent report by Nasscom in collaboration with consulting firm Zinnov has shed light on the increasing adoption of artificial intelligence (AI) among startups in India. According to the Indian Tech Startup Landscape Report 2023, approximately 70% of startups are investing in AI to enhance their product capabilities and internal efficiencies.
The report highlighted that despite facing global economic and regulatory challenges, Indian tech startups are prioritizing the improvement of their business fundamentals, profitability, and growth. In the past year, over 950 new technology startups were founded, and more than 750 received funding. This surge in activity has contributed to the country’s burgeoning tech startup ecosystem, which now boasts over 31,000 startups, with cumulative funding exceeding $70 billion over the last five years.
An interesting trend noted in the report is the rise of tech startups in tier-2 and tier-3 cities, which now account for 40% of the ecosystem. Pari Natarajan, CEO of Zinnov, emphasized that these emerging hubs are transforming into new innovation centers, thereby decentralizing the startup landscape and contributing to the ecosystem’s growth.
In terms of funding, startups secured $6 billion in equity funding in the previous year, with 72% of all funding occurring at the seed stage, compared to 64% in 2022. However, late-stage funding witnessed a decline due to valuation adjustments and a greater emphasis on profitability. Despite these challenges, about 60% of startup founders reported increased revenue and profitability in 2023.
Looking ahead, the report anticipates improvements in funding, upcoming IPOs, and continued innovation across disruptive technologies and key sectors. Furthermore, the DeepTech sector is gaining prominence, with over $500 million invested in 2023. This trend is expected to continue in 2024, with 59% of startups leveraging DeepTech to drive organizational efficiency, 52% to reduce operational costs, and 41% to automate internal operations.
Debjani Ghosh, President of Nasscom, emphasized the need for an exponential acceleration of funding in the DeepTech sector to build India’s Deeptech ecosystem. Additionally, the report highlighted the importance of adopting a pro-innovation, risk-based approach to AI regulation and guiding startups on compliance with the Digital Personal Data Protection Act, passed last year.
Overall, the report paints a picture of a resilient and adaptive tech startup ecosystem in India, poised for further growth and innovation in the coming years.