Over a dozen AI startups in India set to raise seed rounds amid surge in investor appetite

What do these AI startups do?

Most of these are companies developing AI agents or are creating tools to facilitate their development. A bulk of these deals will be sub $5 million each, indicating that they’re still in the early-stages of development, two of the people cited above said.

Why is companion AI hot?

Apart from AI agents, companion AI is another theme that budding AI companies are chasing. Lightspeed and 3one4 Capital are in talks with Kavana, a companion AI platform that aims to build AI humans that can talk to people.

Two investors Moneycontrol spoke with said companion AI is “hot” right now because an increasing number of people are feeling lonely. Over the past months, there has been a steady rise in users who are resorting to human-like AI companions so they can be heard and have someone to speak to. This is not a limited use case, there are similar companies solving in the elder care space and other categories.

AI companion companies are cashing in on these trends by facilitating such interactions and collecting money in the form of micro payments.

There are other AI startups such as SuperMemory, Superbryn, Sherlocks AI and Affluense AI which are all negotiating deals with investors such as Kalaari Capital, Zeropearl, BoldCap Ventures and others as a number of VC funds look to add AI companies to their portfolios.

Peak XV Partners, Lightspeed, 3one4 Capital, Elevation Capital, Kalaari Capital, Zeropearl and BoldCap Ventures did not reply to Moneycontrol’s queries.

What's the investor view?

“AI dealmaking is madness right now in India. There are deals happening left, right and centre. Which ones stand the test of time is anyone’s guess but for now monies are being wired,” an investor with some exposure in the space told Moneycontrol.

To be sure, all the aforementioned negotiations are still ongoing. It is also possible that the conversations do not go through or they evolve which results in some startups raising money from other investors.

“A lot of venture capitalists who have the access are spending more time in the US the past few months. Some are just picking AI startups from Y Combinator’s Demo Day (YC Demo Day) and signing cheques to invest in them,” a partner at a VC fund said when asked what is driving the AI funding frenzy.

AI investments gather pace in India

While AI is still in its early days in India, the country’s startup ecosystem, the third-largest in the world, has seen a notable uptick in investments as VC funds find better companies solving more complex problems, a sign of a maturing ecosystem.

In the first seven months of the year, AI startups have raised $665 million across 109 deals, a 46 percent jump over the $455 million in 95 deals in the year-ago period and $735 million through 151 deals in all of 2024, data from market intelligence platform Venture Intelligence shows.

The average size of the investment has also gone up 24 percent, from $4.9 million in 2024 to $6.1 million this year, highlighting investors’ willingness to deploy bigger sums into promising startups, the data showed.

Not all investors are convinced

However, some investors are opting to wait on the sidelines to see some scale from AI companies before they invest in them.

While some of the existing and large companies are using AI to increase revenues, increase customer retention and cut costs, India is largely absent in the large language models (LLMs) race, per Navin Honagudi, Founder and Managing Partner at Elev8 Venture Partners, which just closed its maiden fund at $160 million.

“On the AI side, we are not seeing too many companies cross the $5 million, $10 million revenue threshold for now…While we are keeping our eyes and ears open, we are not seeing too many AI companies in the growth stage,” Honagudi concluded.