Indian venture capital (VC) firms are increasingly turning their attention and investments towards startups that leverage artificial intelligence (AI) to create innovative consumer products. This shift is fueled by the growing success of consumer tech companies in the public markets, prompting VCs to seek out the next wave of groundbreaking companies in the AI space.
Several AI-driven companies have already secured significant early-stage funding in 2025, demonstrating the burgeoning market for consumer AI across various sectors. For example, Dashverse, an AI-powered entertainment company, raised $13 million in August from Peak XV, with participation from Stellaris and Z47. Additionally, Kuku FM, an audio and video content platform, secured $85 million from Granite Asia in October. Mythik, a startup led by former Housing.com CEO Jason Kothari, also received $15 million in May from various investors.
Nexus Venture Partners, a prominent VC firm, recently announced the closing of its Nexus Ventures VIII, a $700 million fund, to back startups focused on AI, enterprise software, consumer and financial technology at inception, seed, and Series A stages in both India and the US. This fund highlights the increasing interest in early-stage AI companies. Nexus sees a unique opportunity for AI growth in India, driven by the country's vast talent pool, rapid digital expansion, and the increasing demand for localized AI models that support India's many languages and unique service needs.
The firm intends to split its capital between AI startups and India-focused consumer and infrastructure companies. This strategy acknowledges the advanced state of AI development in the U.S. while recognizing India's potential to leapfrog in the field. Startups in India are rapidly building applications using open-source tools, creating opportunities for domestic AI infrastructure companies. Nexus cites Zepto, which uses AI for customer support and delivery routing, and Neysa, which addresses sovereign AI and localized data needs, as examples of successful portfolio companies.
This dual focus allows for cross-pollination of insights, balancing exposure to cutting-edge software innovation with investments in a massive, expanding digital economy and helps manage risk across different market cycles.
In 2025, India witnessed the launch of new VC and private equity funds worth over $12.1 billion, a 39% increase compared to the previous year. Approximately 58% of these funds are targeting early-stage startups, with fintech, consumer-focused funds, and AI-centric vehicles leading sectoral interest. AI-focused funds accounted for 12% of the total corpus.
Looking ahead to 2026, VC firms anticipate a phase of more disciplined investments, with growth returning in a more cautious and controlled manner. Despite a slow start to 2025, with only a few companies going public initially, the IPO momentum picked up, with a total of 13 new-age tech companies eventually listing on the Indian stock exchanges. This wave of successful exits has not only triggered significant cashouts for early backers but has also recycled capital back into the ecosystem, boosting institutional investors' confidence in startups.
