Indian startups may draw $1 bn in new venture funding this year

Nearly $1 billion in new venture funding is likely to flow into Indian startups this year, US venture capital and private equity firm Bessemer Venture Partners said in a report.

Global funding levels have moderated from the historical high of $6 billion in 2021, but there are signs of recovery, with 2024 being poised to exceed 2023’s figures by at least 25%, the report, titled ‘The Rise of Cloud AI in India 2024’, said.

While current AI investments primarily target non-Indian software vendors, the study expects a future shift towards Indian AI providers, similar to the SaaS (software as a service) industry’s evolution in the late 2010s. The report also pointed out that the lines between traditional SaaS and AI-enabled software are blurring rapidly.

India’s SaaS market is growing rapidly, and may surpass last year’s forecast of $50 billion in annual recurring revenue, or ARR, by 2030. Given the AI technology’s swift advancement, revenue is now projected to triple by 2030, it said.

“Despite challenging market conditions with ongoing high interest rates, we’ve witnessed the emergence of new SaaS unicorns this year, including Krutrim AI and Bessemer portfolio company Perfios,” the report said.

“The past year has also seen the addition of three new centaurs, or businesses that reach $100 million annual recurring revenue in India—Amagi, ShipRocket, and Innovacer—further solidifying India’s position as a global SaaS hub,” it added.

In 2023 alone, 27 unicorns–a startup valued at over $1 billion–and 14 centaurs collectively added $5.9 billion in revenue, showcasing the robust growth and maturity of the ecosystem, the report said.

A survey of early-stage software startups in India showed that 90% have launched at least one AI feature in the past year. More than 60% of these startups, previously pure SaaS firms, are now evolving into AI-enabled SaaS providers, it said.

This convergence of AI and services is poised to solidify India’s dominance in the global services market, creating new categories of high-value, technology-driven offerings, the survey showed.

The domestic cybersecurity market in India, valued at $6 billion in 2023, is projected to reach $13.6 billion by 2025. This growth presents a significant opportunity for Indian cybersecurity firms to serve both domestic and global markets, the report pointed out.

Bessemer Venture Partners, which launched a $220 million India fund in 2021, has invested in over 65 startups in India.