While the city may have earned its name as a tech hub, when it comes to generative artificial intelligence (Gen AI) startups, it lags behind others.
According to a Nasscom report, Hyderabad is home to only 5% of 240 startups in this sector in the country.
Bengaluru, meanwhile, has 43% of these startups, Delhi has 20%, and Mumbai or Pune has 12% of these startups.
According to ‘India’s GenAI Startup Landscape Report 2024’, 82% of GenAI startups in India are in Bengaluru, Delhi, Mumbai, Hyderabad, and Chennai. Lack of funding, lack of innovation centres, and non-availability of a partnership ecosystem have been cited as primary challenges that entrepreneurs in this sector are facing, not just in Hyderabad, but elsewhere in the country as well.
City VCs have low appetite for risk
“Venture capitalists (VCs) in Hyderabad have a ‘low-risk’ appetite compared with those in other cities. They say they will put in money if we generate revenue. While Silicon Valley celebrates failures, we are scared of failure here, and this needs to change first so that more people take the risk of starting their own businesses,” said Vishnu Ramesh, founder, Subtl.AI, a startup in the Gen AI sector in Hyderabad.
Identifying his firm as a pre-revenue startup, Vishnu said that he contemplated shifting to San Francisco as closing deals is easier there. “Here, people are time-rich, money-poor. They listen for hours, but the deal may never get closed. It is the opposite in the US,” he said. For things to change, he added, “the whole ecosystem has to come together, more high net-worth individuals (HNIs) should become angel investors, and we need top academic-cum-research institutes incubating startups.”
Agreeing with Vishnu, Gopi Krishna Lakkepuram, founder and CEO of Hyperleap AI, another Gen AI startup, said Hyderabad doesn’t have established VCs. “The startup culture never took off in Hyderabad. Here, they aim for profitability quickly and do not want to run a business at a loss for years in anticipation of huge profits,” he said.
Talent tough to find
Lakkepuram also pointed out that there is a problem finding the right resources in the city. “Most of my staff are working remotely from Gurgaon, Karnataka, among other places, as I am unable to find the right talent here. Many don’t want to work for less salary in a startup when they can make 3x, 4x more in an MNC or GCC here,” he said.
Many more startups than reported
While the Nasscom report shows the city lagging behind others in Gen AI startups, experts point to a discrepancy in the number of startups linked to the city. The report states that Hyderabad has only 12 Gen AI startups, but industry experts from the city say that the city has at least 50 Gen AI startups, which are in various stages.
“Last year, when we compiled a list for the Gen AI summit, we identified more than 50 startups in this sector in Hyderabad. The number would have grown further in the last year. The Nasscom report is under-representing the city for sure,” said Ramesh Loganathan, member of the governing board of incubators at IIITH, IIT Hyderabad, IIIT Delhi, and BITS.
