Number of GenAI startups in India grew over 260% to 240 in the first half of 2024, NASSCOM says

India's generative AI (GenAI) startup ecosystem has experienced a massive expansion, according to the latest report from Nasscom titled “India’s Generative AI Startup Landscape 2024.”

The report, which is based on insights from over 110 startup interviews and a study of more than 240 active GenAI startups, outlines the surge and development within the industry over the past 18 months. 

Exponential growth in GenAI startups

The report highlights that the number of GenAI startups in India surged 260%, growing from over 66 in the first half of 2023 to more than 240 by the same period in 2024.

This expansion is attributed to the rise in innovative product launches and the rapid deployment of generative AI models, with 17 native GenAI language models emerging during this period.

Nasscom’s findings indicate that nearly 80% of the new startups added in the past year focus on GenAI assistants, showcasing a shift in the industry’s offerings.

Funding and revenue growth

Despite being in the early stages, India’s GenAI startups have managed to attract significant investment, with cumulative funding surpassing $750 million since 2023.

The report also points out a dramatic increase in revenue-generating startups, rising from 22% in the first half of 2023 to 75% in the same period of 2024. 

This growth in revenue-generating capabilities indicates the rising maturity and commercial viability of India’s GenAI ecosystem.

Key areas of expansion

Indian GenAI startups are diversifying their focus across three major segments: infrastructure, applications, and services. Among these, productivity-enhancing applications, such as coding companions and workflow automation tools, have seen a notable doubling in funding, with 45 startups now operating in this space.

Additionally, the number of startups offering GenAI assistants has expanded fourfold, with many transitioning from traditional AI chatbots to more sophisticated GenAI-powered virtual assistants.

In the services segment, key models like GenAI-as-a-service and data-as-a-service are emerging, although funding remains concentrated among a few prominent startups.

Emerging hubs and nationwide spread

While Bengaluru remains the leading hub for GenAI startups, hosting 43% of all such startups in India, other cities are quickly becoming significant players in the ecosystem.

Cities like Ahmedabad, Lucknow, Surat, and Kolkata now account for 18% of India’s GenAI startup ecosystem, showing a nationwide spread of innovation beyond traditional tech hubs.

The report notes that there is little difference in the technological approaches or business models between these emerging hubs and established centers like Bengaluru, indicating a cohesive and expanding network across the country.

GenAI startups challenges 

Despite the impressive growth, Nasscom’s report identifies several challenges faced by the GenAI startup landscape in India. These include a lack of patient capital, limited compute resources affecting scalability beyond proof-of-concept stages, customer hesitancy, and a shortage of skilled AI professionals.

Additionally, regulatory concerns and trust issues remain significant hurdles for startups looking to scale their solutions. 

Sangeeta Gupta, Senior Vice President and Chief Strategy Officer at Nasscom, stressed the importance of collaborative efforts to overcome these challenges.

“Achieving this progress requires a collective effort centered on rapid co-innovation within a nurturing ecosystem. We must prioritize funding for high-potential GenAI startups and focus on attracting and developing top-tier AI talent," she noted.