AI Startups Dominate VC Interest Over SaaS Players

India's venture capital ecosystem is undergoing a pivotal shift in 2025, with investors increasingly backing artificial intelligence (AI)-native startups over traditional software-as-a-service (SaaS) players.

- Priyamvada C & Mansi Verma

BENGALURU/MUMBAI:

Between January and June 4, AI-focused startups raised $454 million across 65 deals, edging past SaaS firms, which drew $432 million over 52 deals, according to data from Venture Intelligence. While some overlap exists as SaaS companies adopt AI features, the trend points to a deeper reset in investor priorities. "AI-led startups are commanding 3-4x valuation premiums over traditional SaaS businesses, thanks to their potential for faster scalability and deeper, more transformative use cases," said Abhinav Chaturvedi, partner at Accel.

However, to stay competitive with pure-play AI startups, many SaaS companies are now streamlining operations and aggressively investing in artificial intelligence, according to multiple industry executives.

This trend is pushing established SaaS companies to retool quickly.