AI Start-Ups Funding Declines to $8.2 Billion in Q2

The AI start-up funding in India slumped for the April-June quarter standing at $8.2 billion. It is a 91 percent decline sequentially and 82% decline year on year as per a data by the market tracking firm Tracxn.

This decline comes despite the start-up funding gaining nearly 110 percent growth in the previous quarter; and 56 per cent in the quarter that ended in December 2023.

The data by Tracxn consists of equity funding of AI infrastructure and AI-as-a service tech start-ups.

Highly volatile market due to geopolitical tension, rising interest rates are attributed to the decline in the AI startup funding, with the sector poised to grow in the near future once the market conditions stabillise as per media reports.

Experts believe that the investors stopped funding after the initial excitement and optimism with AI as it was not giving substantial return on investment with many finding it difficult identify startups with a solid business from those that haven’t. This is as per media reports.

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Despite the AI startups defying the funding winter globally, in India, it accounted for only about 0.3% of the overall tech startup funding which stood at about $3 billion, in the June quarter.

In the US for instance, it is noted that the Startups received $27 billion in funding for the April-June quarter, accounting for nearly half the startup funding the country received for that period, as per a New York Times report which cited the pitchbook data.

Calendar year-to-date, Indian AI startups have raised nearly $96 million dollars which is a 61% increase over the same period in 2023. But if you were to compare it to the first half of 2022- the year AI funding peaked at $560 million for the whole year, it is a 82 % decline as per ET.