As a venture investor in the US-India corridor via Operators Studio, I saw 2024 as the year of taking stock, of heads-down building for founders, and quiet contemplation for investors.
A. 2024 Recap
1/ AI (Enterprise)– after the unveiling of ChatGPT on Nov 30, 2022, and the peaking of the AI mania in 2023, 2024 saw a bit of dust settling down in the ecosystem. In the Bay Area, I heard more intellectually honest conversations amongst founders and investors, with folks going deeper into discussing operating details and how to best leverage this tech step function beyond the “AI is going to change everything” hyperbole.
(a) Focus on the Applications layer
Along similar lines, I saw US-India founders go into deep build mode in AI. Most appeared to focus on the Applications layer, which aligns well with their core strengths. Working closely with portfolio companies like Confido Health as well as interacting with several seed-stage US-India founders, it has been particularly heartening to see them doubling down on spending time with customers, while also ramping up on the latest developments in AI. They are actively leveraging new models and tools to quickly ship new features. A lot of early US-India SaaS vibes!
(b) Indian VC skepticism
In private conversations with many large VCs in 2024, I sensed a fair amount of skepticism on whether the current generation of Indian AI companies will be able to compete with global players. As a result, many of them are choosing to be extremely selective in terms of the number of deals, waiting, watching, and observing how things are playing out in the US, while occasionally backing de-risked repeat founders in one-off large deals.
A few are also experimenting with a multiple-bets approach, writing several small checks (up to $1Mn size) into high-potential teams and seeing how they execute. Tailored seed programs have been created to do this eg. Peak’s Surge, Accel’s Atoms, Chiratae’s Sonic etc.
2/ India-to-the-world deep tech
The domestic deep tech market opportunity clearly became mainstream in 2024, with a spectrum of 1st generation companies now well-established, ranging from public companies like ideaForge in drone manufacturing to growth stage space-tech startups like Agnikul, Pixxel, and GalaxEye.
Given these outcomes, almost all major Indian VCs now have a deep tech thesis, which bodes well for the next generation of founders in the domain.
(a) Rise of the 2nd-gen
In 2024, I saw the 2nd generation of deep tech founders like Sharang Shakti (anti-drone defense systems), Astrophel Aerospace (space tech) and Naxatra Labs (EV motors) emerge on the scene. They are piggybacking on the learnings and playbooks of their 1st-gen predecessors to move faster and think bigger.
(b) Global commercial traction
In parallel, I saw early green shoots of Indian deep tech startups starting to go global commercially in a more meaningful way in 2024. The biggest eye-opener for me in this regard was attending Speciale Invest’s Annual Summit in Nov’2024 and getting updates on their portfolio going global.
For instance, Ultraviolette has officially launched its EV Superbike ‘F77 MACH2’ for the European markets. Uravu Labs is starting to get some major international orders for its recycled water technology. Cynlr recently inaugrated its Robotics Design & Research Center in Switzerland. PS: for those interested in a few hours of deep-dive into the India deep tech ecosystem, the full-day recording of Speciale Summit’24 sessions is available here.
I saw similar signs of rapidly growing global traction in the Operators Studio portfolio too in 2024. Flytbase has now emerged as a clear global category leader in autonomous drone software, with major enterprise drone-dock installations across 16 countries. Cradlewise is one of the fastest-growing smart cribs in the US, and giving incumbents like Snoo a run for their money. Playto Labs has created a sharp niche of STEM learning using robotics kits and live instructors, with more than half of its revenue coming from outside India.
3/ Venture Capital
(a) No Enterprise exits
2024 continued to be a fairly tight year for VC financings in the US-India corridor. It feels like the VC ecosystem is still undergoing some sort of recalibration after the 2020/21 mayhem. While VCs saw some great IPOs at least on the consumer side, exits on the enterprise side were almost non-existent.
As a US-India venture investor, I primarily play in 2 areas – (1) AI/ Enterprise Software and (2) India-to-the-world deep tech. Exits in these areas are typically expected via M&A. With Indian acquirers being sparse, and the US M&A environment at a standstill under the previous administration, Indian enterprise exits saw virtually no action in 2024.
While smaller funds like Operators Studio can still generate healthy exits via secondary sales to growth investors, we as an ecosystem still need full company exits via M&A and IPOs to keep the liquidity pipeline flowing end-to-end over the long term.
(b) Limited seed capital
In the US, while the bar for Series As and Bs has moved significantly higher, seed-stage financings continue to see high levels of activity. In fact, most multi-stage firms like A16Z, Sequoia, and Coatue are also writing idea-stage checks into AI as we speak. Essentially, 2024 saw massive crowding at the seed stage in Silicon Valley, and given the bar for follow-ons has increased a lot, graduation rates have dropped significantly. As per Carta – “30.6% of companies that raised a seed round in Q1 2018 made it to Series A within two years. Only 15.4% of Q1 2022 seed startups did so in the same timeframe”.
India’s venture ecosystem behaved a bit differently in 2024. Established Indian VCs appeared to have become fairly risk-averse in the past year, reflecting both their larger Fund sizes (needing to deploy larger checks with more traction) as well as their efforts to triage the excesses of 2020/21. As I wrote in this post a couple of months back:
From what I am seeing in my deal flow over the last few months (and my focus is (1) enterprise software and (2) deep tech), I feel there is almost a dearth of quality, structured & consistent angel/pre-seed/seed capital in India right now.
From what Founders are telling me, almost all major Indian VC firms seem to be holding out & looking for late-seed/pre-Series A levels of traction even to start a real conversation. The proverbial $1Mn+ ARR, 2-3x y-o-y growth…
Anecdotally, it looks like only previously successful repeat founders are mopping up large seed rounds from these firms at the idea/pre-product stage. Pre-seed/seed seems to be significantly tighter for first-time founders.
Genuine question for myself and many India-based enterprise & deep tech founders out there who are fundraising – who are the angels/ seed firms in India that are comfortable in CONSISTENTLY writing checks at the true early stages in enterprise software and deep tech (idea/pre-product/MVP/design partner/some usage stage)? And by consistent, I mean doing 10-12 deals per year.
Essentially, 2024 turned out to be an extremely tricky year for US-India founders to raise seed capital, with rounds taking significant time to come together, investors wanting to see much higher levels of traction, and valuations fairly compressed especially relative to the amount of progress in the business.
Of course, the other side of this coin was that these same factors made the US-India seed ecosystem an attractive pond to fish in for investors in 2024. In fact, looking at both the quality of the teams I evaluated as well as the entry valuations I saw, I believe 2024 will emerge as one of the best vintages of Indian venture capital a few years down the road.
B. 2025 Expectations
As we enter 2025, here are some expectations I have from Global Indian founders. These aren’t predictions; rather, a wishlist of things I would love to see play out, again in the context of my US-India/ India-to-the-world focus:
1/ Thinking bigger
In 2025, I would love to see a “Path to $1Bn ARR” slide in US-India startup pitch decks. As I wrote in this post a month back:
I would like to encourage Indian founders building software companies for the world to think significantly bigger and more aggressive both in terms of how large their business can become and how fast can they get there (y-o-y growth targets).
Why? Because software TAMs and market growth rates are much larger than what our brains can imagine. Look at the growth rates of these public companies:
1. Shopify (Founded in Canada) is growing 21% at $8.2 Billion ARR.
2. Canva (Founded in Australia) is growing 40%+ at $2.4 Billion ARR.
3. Toast is growing 29% at $1.5 Billion ARR.
4. Monday (Founded in Israel) is growing 34% at $940Mn ARR.
I am now encouraging my portfolio founders to think beyond the proverbial “Path to $100Mn ARR” slide and start strategizing a path to hit $1Bn ARR.
It’s time we reset our internal narratives and think bigger and more aggressive as an ecosystem.
2/ Thinking non-incremental
One of my observations is that we as Indian founders at large still have a tendency to go after low-hanging problem statements. As AI gathers momentum, these will be automated away quickly and easily especially by incumbents, making it increasingly difficult for venture-backed startups to differentiate themselves.
It sounds counter-intuitive to the whole Lean Startup movement of the last decade, but I believe that in 2025, it will be easier to build a differentiated startup by going after harder markets and tackling hard-to-build products that need to exist in a future that isn’t fully here yet.
In 2025, I would like to see Global Indian founders build for the world in a category-creation mindset from Day 0, and not be afraid to play the game on hard mode.
3/ Founders physically moving to their target markets ASAP
The importance of founders moving to the market where their target customers are, as close to Day 0 as possible, emerged again and again in various ‘An Operator’s Blog’ podcast episodes like US GTM Best Practices For Founders Starting up in India w/ Vinod Muthukrishnan (Cisco, Uniphore, CloudCherry) and Where is the real opportunity in AI for Indian startups? w/ Rajan (Upekkha).
If you are trying to build a venture-scale AI/ enterprise software/ vertical SaaS startup targeting the US, every year you spend not physically moving here will be a lost opportunity. Within the constraints of capital, immigration regimes, and family reasons, I would strongly recommend that US-India founders expedite their move to the US in 2025.
4/ Accelerating Deeptech exports
I would love to see Indian deep tech startups build on their global momentum and double down on exports in 2025. In particular, I see the Global South as an extremely attractive buyer of Indian technology in areas like space tech, defense, energy, and agriculture.
While the West is a harder nut to crack from a commercial standpoint, it can be leveraged to access growth capital as well as cutting-edge research talent. Soon enough, commercial traction from emerging markets will provide these companies with enough product maturity and credibility to be able to compete in the US and Europe in a meaningful way.
5/ Bounce back of seed VC
We are in the early stages of a massive global AI super-cycle, and there are several categories and pockets where US-India startups are likely to have a strong right-to-win. While remaining diligent in identifying these right markets to go after, keeping a high bar on founder-quality as well, and asking tough questions to them, I would encourage Indian venture investors (including angels, family offices, syndicates, and smaller funds/ Solo GPs) to actively deploy at the seed stage in 2025.
The seed stage is where outlier angel outcomes and fund returners get created and especially at this point in the economic cycle, the risk-reward ratios are extremely strong. By all means, it’s fair to keep the bar high. But the ecosystem needs more courageous risk capital to step up at the earliest stages of building truly innovative companies.
TLDR: for the US-India/ India-to-the-world venture story, while 2024 was the year of taking stock, I expect 2025 to be the year the ecosystem starts coming out of the bottom of the J curve.
Audio Overview of this post (via NotebookLM):
