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Indian AI startups are attracting global venture capital firms. US funds Insight Venture Partners, Iconiq Capital and Sierra Ventures are among the first movers while First Round Capital, QuantumLight Capital and some others are looking for investments, people in the know said.
The companies that have raised funding from global players include Smallest.ai, from Sierra Ventures, and UnifyApps, from Iconiq. Attentive AI, a startup in the construction space, has received $30 million from Insight Venture in a Series B round, valuing the company at $135 million, two people aware of the development told ET.
Sateesh Andra, managing partner at early-stage VC fund Endiya Partners, said they are in initial talks with investors from the Silicon Valley for their portfolio companies for a larger round. Siddhartha Ahluwalia, managing partner at Neon Fund, also said they are getting inbounds from the investors based in the US and Europe for Series B and Series C.
Both said global VCs may come in even earlier for some of their portfolio companies. They did not disclose the name of investors as the talks are in early stages.
This interest comes after a decline in global VC funding to Indian startups post the pandemic.
AI is driving the momentum
During the pandemic, bank loan interest rates in the US and some other western countries fell to zero and that encouraged investors to look at emerging markets to deploy capital, explained Rajiv Mehta, partner at Athera Venture Partners. As the interest rates went back up, investments to the emerging markets such as India declined.
But now, with the AI wave and lowering interest rates, the risk-taking ability is coming back again, Mehta said.
Also Read: VCs chase Indian developer tools startups amid AI frenzy
In addition, over the past year, more Indian VCs have been spending time in Silicon Valley, he said. “They are not just meeting founders but also Valley investors. From that perspective, (Valley) investors have got a taste of what kind of startups are being built and are now starting to come inbound,” he explained.
Ben Mathias, managing partner at Vertex Ventures Southeast Asia and India, said the Indian VC market has matured substantially, compared to 10 years ago, when they had made their initial investments.
“In the last couple of years, there has been a spate of IPOs in India, which have given significant exits to VC investors,” he noted. “All these have likely contributed to Valley VCs stepping up their investments in Indian AI startups.”
Emails sent to First Round Capital and QuantumLight Capital did not elicit any response until press time Tuesday.
Also Read: Seasoned tech pros partner VCs for a piece of the startups action
No scale yet
While this is a welcome sign, Endiya Partner’s Andra pointed out that it is unclear if this would become a mainstream trend as large global investors have yet to make investments in India’s AI market.
Also, while investors might not want to miss the opportunity to enter emerging markets like India, there are multiple startups within a five-mile radius in the Valley, he noted.
“AI is a different beast as you are going global from day one and the bar is high. Indian startups need to be in the top three in their category, or they will not reap the same valuation,” Andra said.
India’s advantage
Shiva Dhawan, founder and CEO of Attentive AI, said the hypothesis behind Insight Venture’s investment in his firm is likely the macro timing of the AI agents and AI-enabled services becoming real plays. Insight Venture Partners did not respond to ET’s queries till press time.
Mehta of Athera Venture said India has always been good at understanding the business needs of the western world as the IT outsourcing hub. “As a result, India is actually better poised than China to solve a lot of the complex problems for a lot of these companies,” he added.
Also Read:AI rush prompts investors to increase focus
The companies that have raised funding from global players include Smallest.ai, from Sierra Ventures, and UnifyApps, from Iconiq. Attentive AI, a startup in the construction space, has received $30 million from Insight Venture in a Series B round, valuing the company at $135 million, two people aware of the development told ET.
Sateesh Andra, managing partner at early-stage VC fund Endiya Partners, said they are in initial talks with investors from the Silicon Valley for their portfolio companies for a larger round. Siddhartha Ahluwalia, managing partner at Neon Fund, also said they are getting inbounds from the investors based in the US and Europe for Series B and Series C.
Both said global VCs may come in even earlier for some of their portfolio companies. They did not disclose the name of investors as the talks are in early stages.
This interest comes after a decline in global VC funding to Indian startups post the pandemic.
AI is driving the momentum
During the pandemic, bank loan interest rates in the US and some other western countries fell to zero and that encouraged investors to look at emerging markets to deploy capital, explained Rajiv Mehta, partner at Athera Venture Partners. As the interest rates went back up, investments to the emerging markets such as India declined.
But now, with the AI wave and lowering interest rates, the risk-taking ability is coming back again, Mehta said.
Also Read: VCs chase Indian developer tools startups amid AI frenzy
In addition, over the past year, more Indian VCs have been spending time in Silicon Valley, he said. “They are not just meeting founders but also Valley investors. From that perspective, (Valley) investors have got a taste of what kind of startups are being built and are now starting to come inbound,” he explained.
Ben Mathias, managing partner at Vertex Ventures Southeast Asia and India, said the Indian VC market has matured substantially, compared to 10 years ago, when they had made their initial investments.
“In the last couple of years, there has been a spate of IPOs in India, which have given significant exits to VC investors,” he noted. “All these have likely contributed to Valley VCs stepping up their investments in Indian AI startups.”
Emails sent to First Round Capital and QuantumLight Capital did not elicit any response until press time Tuesday.
Also Read: Seasoned tech pros partner VCs for a piece of the startups action
No scale yet
While this is a welcome sign, Endiya Partner’s Andra pointed out that it is unclear if this would become a mainstream trend as large global investors have yet to make investments in India’s AI market.
Also, while investors might not want to miss the opportunity to enter emerging markets like India, there are multiple startups within a five-mile radius in the Valley, he noted.
“AI is a different beast as you are going global from day one and the bar is high. Indian startups need to be in the top three in their category, or they will not reap the same valuation,” Andra said.
India’s advantage
Shiva Dhawan, founder and CEO of Attentive AI, said the hypothesis behind Insight Venture’s investment in his firm is likely the macro timing of the AI agents and AI-enabled services becoming real plays. Insight Venture Partners did not respond to ET’s queries till press time.
Mehta of Athera Venture said India has always been good at understanding the business needs of the western world as the IT outsourcing hub. “As a result, India is actually better poised than China to solve a lot of the complex problems for a lot of these companies,” he added.
Also Read:AI rush prompts investors to increase focus
