Generative AI: the Rising Kid on the Start-up Block The AI ecosystem in the country is a flourishing one, with reports stating that more than 4226 startups exist in the space in the country alone.

Artificial intelligence has been on the radar of industries and part of scientific research for ages, since 1950, to be more precise. However, it's one particular fraction, Generative AI, has been on emer gence for some years, with it finally getting its gr and public debut with ChatGPT. To say a common man did not know what generative AI meant a year ago, would not be an overstatement.

The presence and potential of generative AI is so unavoidable that Elon Musk, the business magnate and investor, announced his new venture xAI, with which he plans to 'understand the true nature of the universe'. This decision comes amid him running his other ventures- Tesla, SpaceX, Neuralink, Boring Company, and Twitter. The AI ecosystem in the country is a flourishing one, with reports stating that more than 4226 startups exist in the space in the country alone.

Nasscom, in its recent report revealed that over 60 active start-ups existed in the generative AI section in the country. However, quantity does not equate to quality, as we are yet to get a native counterpart that can match Microsoft's ChatGPT, Google's BARD, or even Apple's upcoming counterpart. But the space is gaining momentum, with both start-ups and investors having hopes riding on it in the long run and for a greater cause. "Generative AI is potentially more transformative than all previous waves of AI, and it will take an ecosystem-level and a mission-scale effort to build India's niche in the global Generative AI landscape," added Sangeeta Gupta, Senior Vice President and Chief of Strategy, Nasscom in the report.

THE RISING START-UPS

Before we begin, let's know the difference between AI and generative AI. "AI relies on explicit rules and algorithms, while generative AI employs machine learning techniques to learn patterns from data and generate new content based on that knowledge," this is straight from the horse's mouth. "Generative AI was being researched for around 15 years. However, a couple of recent breakthroughs in both computing hardware as well as a few tweaks on algorithms have created a lot of new opportunities of utilizing Generative AI," shares Dr. Ananthakrishnan Gopal, Co-founder and CTO, DaveAI. The pre-seed funded start-up offers digital avatars for customer services and customer contact. Aspiro and Vodex.ai are also working in this product category.

While still at its nascence, the technology has piqued the likes of corporates, businesses, governments, and fellow start-ups. Experts feel that start-ups that currently have unique prepositions (and are probably in their Series A or later stages) will find it easier to attract capital as compared to early-stage start-ups. India saw a total investment of $8 billion in the AI space between 2013 and 2022, compared to $249+ bllion and $11 billion of the USA and Israel, respectively during the same period. As far as Generative AI startups in India are concerned $475M+ was infused in them during the FY21-23.

In the 66 start-ups covered by Nasscom, about seven were pre-seed, 16 were seed funded, six were Series A, six were Series C, one received a grant, one was acquired, four had unknown funding round. While the rest remained either unfunded or had unknown status.

A generative AI start-up can be categorized based on its content categories into text, images, audio, video, and multi-modal. Fifty-two per cent of the said start-ups focused on text, images, and videos. Take for instance, Spyne.ai, a Series A funded start-up, helps internet businesses create high-quality catalogs at scale with AI. What sets its offering apart from the rest? It's their 150+ deeptech models. "As we are solving for an industry, becoming the best is the biggest differentiator. We would utilize the funds to build specialized massive datasets for the industry and build the most accurate solution that is better than any other existing solutions in the industry. Survival strategy is to build a niche in a domain, and then expand with multiple use cases. Big Tech companies and upstarts which are building generic Generative AI solutions will not be able to guarantee the quality that we can offer," shares Deepti Prasad. Co-Founder, Spyne.ai. Apart from the 2018-founded start-up, Blend, bhrahmGAN, Hexo.ai, NeuroPixel.ai, Zapero.ai, Mad Street Den, Contlo, and Zocket from the list also focus on image.

$475M+ was infused in generative AI startups during the FY21-23

Source- Nasscom Report "Generative AI Startup Landscape in India: A 2023 Snapshot

Text, Data, and Reports collectively had the highest number of start-ups focusing on it. Staqu is a 2015-founded audio and video analyzing software start-up that believes its survival strategy during the doldrums (and in the long run) will be its customized solutions for customers. "Unlike many players in the industry that only offer video analysis, Staqu sets itself apart by analyzing audio as well, ensuring precise results with an impressive audio accuracy rate of 98.7%. An additional advantage is the activation feature enabled through a simple command "Jarvis Help" in front of the camera, which promptly notifies predefined stakeholders in real time. Staqu's solution is hardware agnostic, seamlessly integrating with a wide range of camera types, including CCTV, IB camera, analogue camera, body-on camera, drone camera, and more," shares Atul Rai, Co-founder and CEO, Staqu Technologies.

"Our goal is to nurture AI and make it self-sufficient so that it can make humanlike decisions, thereby reducing human involvement in crucial domains," adds Rai.

THE HURDLES AND THE FUTURE

The key challenges remain computing intensity, data privacy and security, lack of training data, talent, and funding. The Indian generative AI section saw an influx of $475M+ funding during FY21-23. However, only 30 per cent of start-ups were said to be funded. Most venture capitalists acknowledge that generative AI will be scalable, profitable, and disruptive in nature. "The reality is that 99% of these founding teams may be capitalizing on the sector's buzz but may need more technical expertise, resources, and patience to make generative AI work," notes Anirudh A. Damani, director, Artha India Ventures. He further adds that investors must be cautious when approaching the space for investing. The top investors in this space include Venture Catalysts, Titan Capital, 9Unicorns, Nexus Venture Partners, Zoom, Fractal, Kalaari Capital, and Mumbai Angels.

Currently, it's difficult to upskill a large workforce rapidly in the next six to twelve months due to limited new generative AI skills. "We are allocating our funds to recruit the right talent in artificial intelligence and machine learning that help us to bring new knowledge that can be implemented in our business and make our solutions more useful for our customers," adds Rai. Recently, Tata Consultancy Services announced it was planning to train 25,000 engineers on generative artificial intelligence tools, while Wipro announced it was going to invest $1 Billion in the AI space over the next three years and was going to train 250,000 of its employees on AI fundamentals and the responsible use of it.

"We're observing an upswing in GenAI start-ups, many of which optimize opensource models or foundational APIs for specific tasks, such as legal document processing. While useful, these solutions can quickly become commoditized due to their limited proprietary technology. Others focus on music or visual media generation—these have stronger moats but tend to be niche with restricted applications. For lasting success, start-ups should consider integrating GenAI into existing product value chains, creating a more comprehensive solution rather than a single-faceted one," shares Jatin Desai, Co-Founder and Managing Partner, Inflexor Ventures.