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70% Of Start-Up Founders Are Embedding Artificial Intelligence In Their Solutions

Nasscom Zinnov Indian Tech Start-Up Landscape Report 2023 states that Indian start-ups are leveraging DeepTech to improve organisation efficiency, reduce operational costs, and automate internal operations

70% Of Start-Up Founders Are Embedding Artificial Intelligence In Their Solutions
POSTED ON January 04, 2024 4:09 PM

Nasscom, in collaboration with Zinnov, released the key findings of the Indian tech start-up ecosystem in its report titled, ‘Weathering The Challenges – The Indian Tech Start-up Landscape Report 2023’. India remains the third largest tech start-up ecosystem globally, with over 950 tech start-ups founded in 2023, contributing to more than 31,000 tech start-ups in the last ten years. The cumulative funding for these tech start-ups from 2019 to 2023 has exceeded $70 billion. 

Despite facing global challenges in 2023, including valuation issues, few IPOs, regulatory changes, and macroeconomic and geopolitical trends, Indian tech start-ups remained dedicated to enhancing their business fundamentals, profitability, and revenue pipeline through efficient sales strategies. According to the nasscom-Zinnov Tech Start-up Survey-2023, about 60% of start-up founders reported increased revenue and profitability in 2023. Notably, a significant portion of unfunded tech start-up founders anticipate higher revenues in 2024 than their funded counterparts. 

The use of deep tech is increasingly becoming mainstream. Indian start-ups are leveraging it to improve organisation efficiency (59% of the surveyed tech start-ups), reduce operational costs (52% of the surveyed tech start-ups), and automate internal operations (41% of the surveyed tech start-ups).

The democratisation of Tech in 2023 has led the Indian tech start-ups to diversify into Tier II and Tier III locations. The share of tech start-ups established in emerging hubs rose to 40% in 2023, reaffirming the depth of India’s start-up proliferation. Business model innovations in core sectors witnessed improvement in the last 12 months; sectors such as Automotive, Industrial, and Manufacturing recorded stability with an increase in the share of funding as compared to other sectors. 

Despite the news of layoffs dominating the start-up sector in 2023, as per the survey of over 100 start-up founders, over 65% have done moderate hiring in 2023. 

Trends That Will Shape 2024

As the Indian start-up landscape unfolds in 2024, opportunities and risks of the global environment will continue to create a shadow. Overcoming challenges, the ecosystem will likely see improvement in funding, impending IPOs, and innovation across disruptive technologies and key sectors. 

Navigating 2024, founders expect to continue the revenue growth path with measured steps focusing on optimising expenditure and maximising profitability for B2B tech start-ups. 

Investments in DeepTech will continue an upward trend in 2024. With Gen AI acceleration, 70% of start-up founders embed Artificial Intelligence in their solutions. 

Sharing her thoughts on the tech start-up ecosystem in India, Debjani Ghosh, President of Nasscom, said, “In 2023, despite facing global economic and regulatory challenges, Indian tech start-ups have prioritised the imperative of enhancing their business fundamentals, driving profitability and growth. India’s tech start-up ecosystem has matured, attracting more than $70 billion in cumulative funding between 2019 and 2023.” 

She added that this growth is now anchored in a strategic shift towards improving business metrics and revenue streams. DeepTech, a key innovation driver, accounts for just 14% of this funding and needs an exponential acceleration to build India’s Deeptech ecosystem. The proliferation of tech start-ups in tier-II and III cities marks the ecosystem's resilience.

Pari Natarajan, CEO at Zinnov, reflected that despite funding headwinds—including valuation corrections, selective capital allocation, and regulatory changes—India's tech start-up ecosystem continues to grow at an impressive clip. 2023 saw the launch of over 950 new tech start-ups, bringing the total to over 31,000. 

“The noteworthy expansion isn't just numerical; it signifies a resilient adaptation to macro-economic, business and technology changes. DeepTech, a burgeoning sector, is gaining prominence, and tier-II/III cities are transforming into innovation hubs, decentralising the start-up landscape. The India start-up story is no longer about scale and innovation but also efficiency and adaptability - all building blocks of sustainable value,” he added.  

As AI acceleration has taken centre stage, a strategic focus on developing the deep tech ecosystem is crucial. This includes identifying key sectors for deep tech investment, fostering an integrated approach for innovation, market connections, and support in testing, patent filing, certifications, and training. 

Prioritising domestic capital through initiatives that nurture innovation, alongside co-investment programs, will bolster domestic VCs. Additionally, easing regulatory compliance by guiding start-ups through legislation like the DPDP bill and angel tax and adopting a pro-innovation, risk-based approach to AI regulation is essential.

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