By Krishna Mehra and Poorvi Vijay
Slowly at first, and then all at once. The transition from predictive to generative AI that captivated the world in 2022-23 took years to materialise. Now, barely two years later, we stand at the precipice of an even more profound transformation: the era of autonomous AI agents that can perform various tasks and actions on the user’s behalf.
The signals are unmistakable. In just the past two months, we've witnessed an unprecedented mobilisation by tech giants to stake their claim in this new frontier: OpenAI with its improved reasoning model O3, Google with Gemini 2.0 and Project Mariner, and Anthropic with Claude Computer Use. As long-time observers and investors of India’s AI ecosystem, we see this rapid evolution as a pivotal moment for Indian SaaS and AI founders.
From Generation to Autonomy: AI's Evolution
The first wave of AI, characterised by generative tools, assisted with tasks under human guidance. Now, with breakthroughs in model accuracy, reasoning, context windows, and multimodality, we're entering the era of autonomous agents. These advances enable AI to perform complex reasoning and autonomous decision-making, moving beyond simple tasks.
Dawn of the Agentic Era
The rise of AI agents has unlocked unprecedented levels of autonomy in workflows, enabling businesses to automate complex, outcome-driven processes across industries – reflected in the AI Agents market growing at a 44% CAGR. We are seeing businesses starting to measure success through concrete metrics such as faster issue resolution (in support agents), leads conversion (in sales agents), or collections received (in loan collection agents). We put our conviction to the test and moved early in this category over the last two years by investing in UnifyApps to create a foundation by connecting data silos, Composio to create an agentic framework, and Maxim AI to ensure high-quality and observability post-deployment.
Through conversations with founders and enterprises, we’ve seen AI move beyond buzzwords into boardrooms in 2024. Our analysis shows 65% of Fortune 500 companies referenced AI, with giants like Accenture and EY investing over $1 billion. AI is replacing manual tasks in areas like customer support, legal review, and healthcare documentation. Sales agents use AI platforms like PolyAI and Clay for routine tasks, enabling focus on deals. Our portfolio companies are automating fraud investigations and customer service. Breakthroughs like GPT-4, Claude 3.5 Haiku, and Llama 3.3 have made AI more efficient and cost-effective, reducing inference costs by 100x, empowering smaller businesses.
India's Strategic Advantage in the AI Era
India is uniquely positioned to lead the AI revolution due to its combination of technical talent and structural advantages. Unlike the SaaS revolution, India is aligned with global AI innovation, with significant VC funding directed towards AI-first startups. Indian developers contribute extensively to AI repositories and have access to quality capital. Our track record in building world-class tools like Postman and BrowserStack showcases our ecosystem's capability to drive AI infrastructure. With a cost advantage in talent and AI deployment, Indian startups can scale globally while maintaining lean operations.
Three Pillars of Opportunity
At Elevation, we're putting significant conviction behind our AI thesis. We are deeply engaged with founders building across the stack, and we're seeing unprecedented opportunities emerge. Based on our extensive market analysis and hundreds of conversations with founders and enterprises over the past year, we've identified three key areas where we believe the next generation of category-defining companies will emerge. We're actively deploying capital and resources in these spaces, and our excitement continues to grow as we see early validation through both founder quality and early customer traction.
Infrastructure and Middleware
First is the infrastructure and middleware layer. As companies increasingly deploy open-source fine-tuned models across multiple cloud providers, they need robust developer tools for evaluation, optimisation, and cost management. The emergence of AIaaS platforms allows businesses to integrate AI capabilities without extensive in-house expertise. Middleware simplifies this process by providing plug-and-play solutions that can be easily incorporated into existing workflows, thereby accelerating adoption and deployment.
Vertical AI Agents
Second, we're seeing innovative applications of AI agents. Indian companies are pioneering solutions that enhance human worker productivity, particularly in standard internal workflow areas like customer support, success, and accounting. AI’s influence is extending far beyond traditional software budgets—it’s now making inroads into labour spend, fundamentally reshaping how businesses allocate resources. By capturing labour spend, AI presents a massive value unlock opportunity for businesses as it makes them faster, leaner, more agile, and better equipped to compete in the digital-first economy.
Services
Third, and perhaps most significantly for India, is the service opportunity. As global enterprises grapple with AI implementation, India's IT services legacy gives us a unique advantage. New-age IT services companies, supercharged by AI, are helping enterprises optimise their processes and workflows. This shift, where Indian companies are stepping in with service-led models, mirrors earlier transitions in tech, such as how AWS eased businesses into cloud computing or WordPress democratized web creation through human-assisted workflows. Companies like Infosys and Wipro are already helping global retailers and healthcare providers implement AI solutions, while startups like Fractal Analytics are working with Fortune 500 companies on bespoke AI solutions. We believe this is a unique opportunity for new Indian companies to emerge and capitalise on this growing AI services wave.
We’re also seeing the emergence of verticalised AI applications that combine deep workflow understanding with powerful data flywheels.
The Road Ahead
As we enter 2025, AI presents limitless opportunities. Advances in AI agents, services-led models, and vertical integration are transforming industries and creating new markets. While the potential is vast, it comes with the responsibility to balance innovation, ethics, scalability, and accountability.
India's moment in the AI revolution has arrived, and we're ready to seize it.
(The authors, Krishna Mehra is Partner and Poorvi Vijay, Vice President, Elevation Capital.)
Views are personal and do not represent the stand of this publication.
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