AI Summit: Revenue not critical for early AI startups; investors seek 'proof of progress', says Activate’s Aakrit Vaish

AI Summit: Early-stage AI startups don’t need revenue yet; Investors are backing ‘proof of progress’, says Activate’s Aakrit Vaish

India’s artificial intelligence (AI) funding cycle is still being defined by experimentation and product discovery rather than monetisation, with investors backing startups before clear revenue models emerge, said Aakrit Vaish, co-founder of conversational AI firm Haptik and founder of AI-focused venture fund Activate.

"At Activate, we go after absolute early-stage companies; we’re practically incubating businesses. At that stage, obviously, there’s no revenue," Vaish told Moneycontrol on the sidelines of the India AI Impact Summit.

Even at the Series A and B stages, investors are "not necessarily looking for revenue as much as proof of progress," he said, pointing to indicators such as customer traction, iteration cycles, and product learning.

Vaish launched Activate in December with a planned $75 million corpus to back AI-native startups at inception, as first reported by Moneycontrol.

Funding activity heavily skewed to the earliest stages

The current investment pattern reflects that early-stage focus. Seed-to-Series A rounds accounted for nearly 80 percent of AI deals in India in 2025, according to data from market research firm Venture Intelligence, indicating that capital is being deployed to support experimentation rather than scale established businesses.

The early-stage skew is also reflected in the volume of companies currently in the fundraising pipeline. Moneycontrol reported earlier that over a dozen AI startups, including Claim Health, Cubic, Theta Software, Cua, Coinvent AI, ScalarField, Sookti AI, and Synth Bio, are in talks to raise seed rounds from investors such as Peak XV Partners and Elevation Capital, as venture firms step up early-stage deployment.

Rise of specialist AI investors

The surge in early-stage dealmaking has coincided with the emergence of dedicated AI-focused funds. Moneycontrol previously reported that the number of venture funds with an AI focus tripled, with 16 such funds raising about $1.87 billion in 2025 compared with five funds raising $358 million in 2024.

Activate is among this new class of investors stepping in earlier in the company lifecycle and working closely with founders as they shape both technology and business models.

AI companies will not follow the SaaS playbook

Vaish cautioned against benchmarking AI startups against the software-as-a-service (SaaS) companies that dominated the previous decade.

"The worst analogy is to think of AI as the new SaaS. Don’t compare it," he said. "Revenue growth will look different, metrics will look different, gross margins will look different. The whole playbook will look completely different.”

Revenue becomes a key metric only at later stages, alongside expectations of faster scaling.

“From Series C onwards, of course, revenue matters. But the new factor…is the pace of revenue growth,” he said.

Strong technical talent pipeline, but use cases still evolving

Vaish said India already has a deep base of engineering talent entering the AI ecosystem.

“The talent exists — there is no doubt about it… there is enough and more talent available, and very strong technical talent,” he said.

The challenge now is translating that technical strength into clearly defined commercial opportunities. “What takes time…is for them to narrow down and find the right problem statement and the right business problem.”

Valuations remain measured despite global AI hype

Despite heightened enthusiasm globally, early-stage valuations in India remain relatively contained.

"We invest at the inception stage, seed valuations are typically anywhere between $10 million to $20 million, depending upon the quality of the founder and the idea," Vaish said, with some rounds stretching to $25-30 million.

Sovereign AI emerging as a theme to watch

Vaish also pointed to sovereign AI as an area that could see greater private capital participation.

"Everybody thinks of sovereign AI as the government putting GPUs or creating policies," he said. "But I think sovereign AI could actually be a large opportunity for VCs and capital providers to invest behind and build large outcomes," he further noted.

For now, he said, India’s AI ecosystem remains in a build phase, characterised by early validation, technical experimentation, and capital formation before clearer commercial winners emerge.