India received $3.24 billion in total investments in AI startups in 2022, surpassing other countries like South Korea, Germany, Canada, and Australia.
According to Stanford University’s annual AI Index report, New Delhi, India, came in fifth place in terms of investments received by startups offering artificial intelligence (AI)-based goods and services last year.
India received $3.24 billion in total investments in AI startups in 2022, surpassing other countries like South Korea, Germany, Canada, and Australia. The US, China, the UK, and Israel are listed before India.
According to the report, India was the sixth-largest recipient of AI investments between 2013 and 2022, with funding for AI startups totaling $7.73 billion. This investment was made last year to the tune of almost 40%.
Conversational AI startup Uniphore, based in Chennai, raised $400 million in a Series E funding round at a valuation of $2.5 billion last year.
Despite the fact that there has been a decline in global AI investment since 2021 as a result of the economic downturn, experts anticipate a rebound in VC funding this year, especially in light of the enormous demand for generative AI products and OpenAI’s ChatGPT among businesses and consumers.
“Given the unprecedented interest and the increasing industry sentiment that it is a step change in AI capabilities, I expect VC investments to gather pace in the coming quarters,” said Kashyap Kompella, an AI analyst and chief executive at research firm RPA2AI. Aurojyoti Bose, lead analyst at GlobalData, said “Long-term prospects are likely to be promising” and the rebound in both deals volume and value in the December quarter could be seen as an indication of it. According to the findings of VC analytics firm Tracxn, investments in AI startups in India jumped from $1.7 billion in 2020 to $5.2 billion in 2022. “The development and return on the investment potential of investing in AI firms is very high. Despite the current funding winter and the economic slowdown, AI startups are expected to experience this upward trend in the coming years,” Neha Singh, co-founder, Tracxn said.
Numerous Indian businesses are looking into the use of generative AI models, including Flipkart and MakeMyTrip. Startups like GupShup and Exotel have also unveiled platforms for building chatbots that are similar to ChatGPT and are powered by OpenAI’s GPT models.
According to Kompella, a number of startups in India are creating products based on GPT models. “But a moat can be established only if there is something extra – for example, a custom data source like Bloomerg’s FinanceGPT based on proprietary datasets, or an innovative RLHF fine-tuning for specific use cases,” he added.
According to the Stanford report, American institutions were home to 54% of the researchers working on large language models (LLMs). But last year, scientists from Canada, Germany, and India made their first contributions to the creation of LLMs.
Kompella noted that while the costs of developing fundamental AI models are high, the financial benefits are not guaranteed. Many AI startups, he continued, still lack a clear business plan.
“For example, Stable Diffusion is among the top three image-generative AI tools, along with OpenAI’s Dalle-2 and MidJourney. But despite that, it appears that Stable Diffusion is struggling to find a profitable business model. AI units of large tech firms and leading companies like OpenAI are all in the heavy investment phase, not in the generate profits stage,” said Kompella.
