Topics In Demand
Notification
New

No notification found.

Key Trends in Gen AI Startups: Pivoted Vs Native
Key Trends in Gen AI Startups: Pivoted Vs Native

77

0

India experienced growth in the number of Gen AI startups in H1CY2024. It increased from 66+ in H1CY2023 to 240+ in H1CY2025. This growth has largely been responsible because of the excessive growth in pivoted Gen AI startups. Let us first understand how we can classify native Gen AI Startups and pivoted Gen AI Startups.

Key Features of Native Gen AI startups

  • Inception after OpenAI’s ChatGPT 3.5 in Nov. 2022: Native Gen AI startups are counted as those having started after the first commercial launch of a Gen AI model
  • Bootstrapped beginnings: 70% of native Gen AI Startups incepted with no outside funding, remaining came from incubators or venture studios
  • Success markers for natives:
    1. Starting up with innovative market-focused use case
    2. Moat lies in access to exclusive and proprietary data sources
    3. Technically skilled founders able to build low-cost and scalable Gen AI tools

Key Features of Pivoted Startups:

  • Pivoted Gen AI startups are typically established before 2023
  • According to the India's Gen AI Startup Landscape 2024, 47% of pivoted startups were started as AI native startups and later integrated Gen AI into their solutions.
  • According to the India's Gen AI Startup Landscape 2024, 81% of Pivoted Startups operate in the Applications layer.

Pivoted Gen AI startups experienced 6X growth in number since H1CY2023. There were multiple reasons responsible for the rise of pivoted Startups.

A diagram of a red circle with numbers and a few red squares

Description automatically generated with medium confidence

  • A shift from automation era to autonomous era: Startups have evolved from simple task automation to building autonomous systems capable of decision-making and self-improvement.
  • Low-cost accessibility of Foundational models: The reduced cost and increased availability of foundational AI models have democratized advanced AI capabilities for startups.
  • Gen AI created a blue ocean for markets having potential for cost optimization and revenue increment: Generative AI opened new, untapped markets where companies can achieve both significant cost savings and revenue growth.
  • Disrupted Application-based Use Case across multiple functions and sectors: Generative AI has transformed traditional application models, enabling innovative solutions across industries like healthcare, finance, and education.

Native Startups increased from 48 to 127 from H12023 to H12024. Few reasons responsible for the growth of native Gen AI startups

  • 17 + LLMs with unique strengths and cost effectiveness.
  • Government offering AI-Specific infrastructure through India AI Mission and investing in both structured and unstructured datasets (Bhashini), including those in Indic languages, to make them publicly accessible.
  • Early-Stage Investor Interest in Gen AI Startups. It has encouraged many entrepreneurs to enter the Generative AI space, driving the creation of new startups.

Key Trends in Funding in Native and Pivoted Gen AI Startups:

A graph of a different color bar

Description automatically generated with medium confidence

  1. Native Gen AI startups continue to dominate the funding mix since H1 CY2023, albeit at half the growth rate of pivoted ones
  2. In H1FY2024, 70% of native Gen AI funding in H1 CY2024 has gone into model makers.
  3. 45% of the net new funding since H1 CY2023 for pivoted startups has gone into assistants or SaaS solutions, converted from predictive AI to text or voice-based

Gen AI assistants

  1. Pivoted Gen AI startups and industry-focused native applications report higher revenue: Native retail-tech Gen AI startups Mason and Muoro report revenues in the $1-5 Mn range, while Fluid AI, a pivoted Gen AI startup providing virtual assistants, generated over $5 Mn in revenues since H1 CY2023.

Download the report to know more: India’s Gen AI Startup Landscape

Source: India's Gen AI Startup Landscape Report 2024 (https://community.nasscom.in/communities/nasscom-insights/indias-generative-ai-startup-landscape-2024)


That the contents of third-party articles/blogs published here on the website, and the interpretation of all information in the article/blogs such as data, maps, numbers, opinions etc. displayed in the article/blogs and views or the opinions expressed within the content are solely of the author's; and do not reflect the opinions and beliefs of NASSCOM or its affiliates in any manner. NASSCOM does not take any liability w.r.t. content in any manner and will not be liable in any manner whatsoever for any kind of liability arising out of any act, error or omission. The contents of third-party article/blogs published, are provided solely as convenience; and the presence of these articles/blogs should not, under any circumstances, be considered as an endorsement of the contents by NASSCOM in any manner; and if you chose to access these articles/blogs , you do so at your own risk.


images
Madhumay
Deputy Manager - Research

Comment

images

This highlights the remarkable growth in Gen AI startups, distinguishing between native and pivoted types. It's fascinating how pivoted startups, especially those transitioning from automation to autonomy, are thriving. The affordability of foundational models is a game-changer, leveling the playing field. However, the real challenge lies in harnessing proprietary data and turning it into a unique value proposition. It will be exciting to see how both categories continue to evolve as the AI space matures.

© Copyright nasscom. All Rights Reserved.