AI-focused start-ups raise $31.8 million

June 30, 2023 16:54

Generative AI, a now prominent AI use case, has stolen the deeptech spotlight owing to its universal adaptability across sectors, while Web3 has been pushed to the sidelines. This has also impacted investor sentiment.

Industry stakeholders Business Standard spoke to say investors are now taking a calibrated approach to the Web3 sector in the aftermath of multiple cryptocurrency collapses and prevailing regulatory uncertainties, amid an overall decline in private equity and venture-capital bets.

Web3 as an industry covers technologies such as decentralisation and token-based economies such as cryptocurrencies and non-fungible tokens.

Currently, there are 1,367 active blockchain start-ups in the country. Of these, Indian Web3 start-ups have collectively raised just $7.1 million in funding across eight deals until June 1 this year, a 99 per cent decline over the same period last year, according to the data from Tracxn, a market intelligence platform.

These start-ups raised $904.9 million across 55 deals in calendar year 2022.In contrast, generative AI-focused start-ups have managed to raise $31.8 million across four deals so far this year. This, despite just 42 generative AI start-ups currently operational in India. Calendar year 2022 saw generative AI investments totalling $409 million across 14 deals.

One of the biggest factors in the rise of generative AI, which has largely remained immune to regulatory pangs despite uncertainty, has been its tremendous adaptability.

"The generative AI sector has seen particular investor interest due to the unprecedented rate of innovation and adoption of the likes of ChatGPT, and character-AI applications built on large language models. Other than the rapid adoption curves, this space has also seen a significant influx of talent as well recently,' said Ravi Srivastava, partner, Leo Capital, a technology-focused early-stage venture capitalist.

The primary reason for this decline in Web3 funding, experts signpost, is a dearth of regulations in the sector.

"The lack of regulatory clarity and the recent regulation-by-enforcement stance of government agencies have made it harder for investors to take an informed decision, and triggered a further slowdown in the space," said Srivastava.

Cryptocurrencies, which account for a big chunk of Indian Web3, have also suffered from this ambiguity.

"The fact that India has the second-largest crypto user base indicates how lucrative the market can be domestically," said Pearl Agarwal, founder and managing director, Eximius Ventures.

-- Aryaman Gupta/Business Standard

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