Generative AI : India Ready for the Plunge

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Rajneesh De, Consulting Editor, APAC News Network

The advent of OpenAI’s ChatGPT has literally opened up a new horizon in today’s tech-driven world and India has been no exception to this trend. The number of Indian GenAI-based SaaS startups has more than doubled since 2021. There are around 60 Generative-AI startups in India as of Q2 2023 up from around 18 in 2021.

Gradually, the Indian numbers in Generative AI are starting to get counted in the global perspective, both in sheer numbers as well as in funding and investments.. Worldwide there is an explosion in the number of Gen AI-native SaaS companies and a surge in investment capital, with over $12 billion funneled into 60+ emerging domains in FY23 alone. The Indian players, on the other hand, raised $590 million in funding as of May 2023. While globally there are 259 generative AI startups, India has around 20 pure-play generative AI startups.

Indian companies embracing Generative AI

Some of the pure-play Gen AI SaaS startups from India include the likes of Composio, Workhack, and Rapidclaims while the IT services giants like TCS, Infosys, Wipro and HCL Tech too have jumped into the bandwagon. Again this reflects the global trend where generative AI has attracted software giants like SAP, Salesforce, and IBM to explore this space.

The services sector stands to benefit the most from the impact of generative AI and the Indian IT services giants are already recognizing it. Infosys, for example, is already working on several generative AI projects to address specific aspects of clients’ businesses. TCS, on the other hand, is exploring cross-vertical solutions to automate code generation, content creation, copywriting, and marketing among others.

While the IT service giants are already reaping the benefits, the Indian SaaS companies stand poised to embrace this wave of Generative AI most by building AI-powered products which can leverage the depth of domain and functional expertise available in India. From creating new AI capabilities to integrating ChatGPT into customer-centric operations, India’s top SaaS players are investing and exploring Gen AI to attract investors and eventually bring down their customer acquisition costs.

Cloud-based software services company Freshworks plans significant investments to integrate generative AI into its operations. Another SaaS giant Zoho has launched 13 generative AI application extensions and integrations, powered by ChatGPT. The e-commerce giants too are not lying behind. Flipkart uses ML to refine customer shopping experiences, while Razorpay utilizes AI to combat payment fraud. Vedantu has integrated AI into its live classes, making them more accessible and affordable.

Generative AI benefits for India

It is these Saas companies in India who stand to gain the maximum from a successful generative AI revolution in the country. The numbers support this conjecture. The India-centric SaaS ecosystem could achieve $50-70 billion of revenue and $0.5 to $1 trillion of enterprise value creation aspirations by 2030. This would be up from around $2.6 billion in 2020, and around $7 billion in 2022. The projected 2025 estimates will be around $15-20 million. Much of this is expected to be driven by generative AI.

There are around 3,500 SaaS players in India, with 19 unicorns and around 80 with more than $10 million ARR (Annual Recurring Revenue. Despite macro-economic pressure, most of them are witnessing healthy growth, thanks in no small measures to generative AI. Around 40% of their revenues are coming from the mid-market and SMBs only and that is significant. Once the large enterprises too increase their extent of adoption, the numbers are expected to automatically go up.

Hotspots of activity and consequent use cases around Gen AI are emerging in India, particularly in horizontal applications space like marketing automation, sales and customer support, audio-video design tools, and productivity tools. Early-stage SaaS companies in heavily disrupted areas are getting encouraged to pivot and remodel their businesses around Gen AI. Larger players are looking to adopt a dual approach: integrating Gen AI into their existing operations while simultaneously building new AI-centered businesses.

The younger SaaS startups are stepping into the generative AI bandwagon with even more gutso. A startup like Gan enables businesses to repurpose videos at scale. TrueFoundry assists in building ChatGPT with proprietary data. Cube facilitates AI-powered customer support on social media. MachineHack has launched a generative AI tool that offers data analysis on the go while Rephrase.ai offers a video and animation creation solution that utilizes advanced AI for visual dubbing.

Money for AI and the social challenge

This surge of interest for generative AI has prompted nearly all venture funds in India to develop investment strategies in this emerging space. Together Fund which launched its Fund II recently with a total corpus of $150 million is looking to invest in companies that solve using Generative AI. It had been already investing in DevTools, SaaS and a few AI-based startups from its Fund I and now the difference is that AI has come on top. For Accel, another high-profile venture firm operating in India for over a decade, AI is one of the two main themes across the new cohort of its early-stage venture program.

Surge, Sequoia India & Southeast Asia was early to this trend, having partnered with 7 to 8 AI companies across earlier Surge cohorts. While few players supported by Surge have been working on this space for many years, what cannot be denied though is the spectacular pace of projects and startup creation post the launch of ChatGPT. Sequoia India and SEA is currentky evaluating at least five firms in this space each week.

While it is understandable how the SaaS companies and IT services players have adopted generative AI with enthusiasm, the downside is the expected socio-economic upheaval expected due to workforce truncation. In fact, large SaaS firms have undertaken layoffs and cut down on their marketing and other spending drastically to brace for the macro pressures. Freshworks undertook at least three rounds of performance-based layoffs, while Zoho have cut down on placement hirings. E-commerce startup Dukaan faced huge flak online after replacing 90% of its customer support team with an AI chatbot.

Government policy on generative AI

No wonder therefore that for India to tap the Gen AI opportunity, there are factors like government support in terms of making capital and public data goods available for enterprises.
The vision to make generative AI requires concerted efforts from key stakeholders like industry associations, government, investors across stages, and corporations. Each plays a unique role, with specific actions that can power the Indian SaaS ecosystem. But what perhaps might be crucial is the government support without which India might not still make its mark in generative AI.

Notwithstanding, all the positive stories and despite being home to one of the world’s largest startup ecosystems, India after all is yet to make a material impact in the rapidly advancing AI arena. No homegrown Indian contenders have emerged to challenge the dominance of large language model titans such as OpenAI’s ChatGPT, Google Ventures–backed Anthropic, or Google’s Bard. While there are over 1500 AI-based startups in India with over $4 billion of funding, India is still losing the AI innovation battle, primarily still owing to more forthright government support..

Navigating the current complex macro-economic climate with multiple global disruptions and rapid technological changes will require those generative AI players to build a mix of offensive and defensive moves. The policy level support from the government is therefore essential. Amidst this landscape, the government has declared that India will not regulate the growth of AI, taking an approach different from many other countries.

Meity has unambiguously stated that AI is a kinetic enabler of the digital economy and innovation ecosystem. With a vision to ‘Make AI in India and Make AI work for India’, MeitY has approved the implementation of ‘National Program on Artificial Intelligence’ for developing AI based solutions and ensuring responsible and transformational use of #AI for All.

The Department of Science & Technology is implementing the National Mission on Interdisciplinary Cyber-Physical Systems (NM-ICPS). Under this mission, Technology Innovation Hubs (TIH) have been established on AI and ML at IIT Kharagpur. This aims to provide the state-of-the-art training and capacity building for the creation of next-generation scientists, engineers, technicians, and technocrats in the field of AI.

Therefore, the government will harness the potential of AI to provide personalized and interactive citizen-centric services through digital public platforms. INDIAai, the Government of India’s National AI Portal, had conducted quite a few studies and hosted few discussions with some of the most prominent voices in Generative AI, AI Policy, AI Governance and Ethics, and academia to examine the impact, ethical and regulatory questions, and opportunities it brings to India.

The inaugural roundtable, held on January 31, 2023, reviewed the current state of Generative AI and examined the recent excitement around the issue. The second roundtable conducted on February 28, 2023, looked deeper into the ethical difficulties surrounding Generative AI, as well as the need for regulatory frameworks and how to build policy approaches on the subject. The third roundtable took place on April 24, 2023 and focused on the India opportunity in Generative AI, particularly the economic implications, and how these technologies may revolutionise many sectors and segments of the economy.

Tracking Generative AI startups

MachineHack hosts generative AI competitions, courses, assessments and coding challenges. The company has built AI co-pilot for developers, offering guidance throughout their AI career journey. It assists developers in improving their coding skills and also provides code recommendations and suggestions. The company recently launched a generative AI tool that offers data analysis on the go.

Rephrase.ai offers a video and animation creation solution that utilises advanced AI technology for visual dubbing. Its video creation technology learns the facial characteristics of people based on audio input, allowing for the creation of photorealistic faces for various texts or audio inputs.

Mockey is an online mockup generator that utilises AI/ML technology through which users can create impressive mock-ups for apparel, accessories, and a wide range of products, and conveniently download high-resolution photos suitable for any purpose.

Blend utilises the power of generative AI to assist e-commerce sellers in effortlessly generating stunning product photos and marketing materials within a minute. By leveraging Blend’s technology, sellers can experience significant enhancements, such as a 20% improvement in the return on ad spend (ROAS) and higher conversion rates on their product pages.

ProbeAI serves as an AI Copilot designed specifically for data analysts. It assists analysts in various tasks, including generating SQL code, identifying relevant tables, optimising SQL code, and providing additional functionalities to streamline their workflow.

Revition claims to have developed the world’s first centralised system for customer support. The platform offers a unified support interface, allowing consumers to instantly access support from companies using a single universal ID/Account and application.

Fasthr.AI, is a talent screening platform powered by GPT-4, claiming to be the most powerful solution at the intersection of generative AI and HR-tech. It aims to revolutionize talent screening by offering effortless screening, accurate identification of top talent with 96% accuracy, faster position filling, and the ability to generate customised tests within seconds.

SVAYO is a generative AI and social startup for beauty salons. The platform aims to transform personal grooming and styling services through the use of AI by offering personalised recommendations and services tailored to the individual’s needs and preferences. Users can access a virtual stylist powered by AI, who recommends services and stylists based on trends that match their selfie.

Insight AI provides AI-powered solution that optimizes sales conversion and decreases the turnaround time by providing the customer with real time insight and exact product match for businesses (D2C) and enterprises.

Simplomatic India creates smart digital solutions for individuals, startup companies, and brands. It offers expertise in IT strategy and consulting, artificial intelligence, and website and app development.

Docturnal is a MedTech startup that provides Point of Care & Non-Invasive Screening of Infectious diseases such as Pulmonary Tuberculosis & COVID19 (including monitoring) offering real-time results leveraging ML over Aural and Clinical inputs. In the non-communicable area, it also screens for lung cancer & COPD