Tech founders need to shift to a hyper-competitive mindset to align with the intensity of their US counterparts, as the race for AI innovation gathers steam and Indian companies compete with global peers to build standout AI-first applications, said Prayank Swaroop and Shekhar Kirani, partners at venture capital firm Accel.
They said there’s a noticeable difference in attitude of founders in the US and India and when founders from India visit the US and see the ambition and pace there, it often changes their perspective. “If they don’t match that level of intensity, they risk falling behind,” the two added, while speaking at a media roundtable at the Accel AI Summit.
Accel operates a $650 million early-stage fund to invest in startups in India and Southeast Asia, across sectors such as AI, consumer, fintech, and manufacturing.
This shift in mindset is crucial because the AI sector right now — across foundational models, middleware, or platform layer, and the application layer at the top — is hyper competitive and rapidly evolving.
On the platform layer, some startups from India are gathering momentum, but not at the same scale as those from the Bay Area, Kirani added. “For platform companies to succeed, they typically need to establish themselves in the Bay Area first, only then does the rest of the world adopt their solutions,” he said, adding that the application layer is where India has a real oppurtunity to win.
Surging valuations
While the supply of capital is healthy for AI-first companies, their valuations are significantly higher than the rest of the sectors. For pre-revenue AI startups, valuations have stabilised, but once these companies demonstrate product-market fit and revenue growth, their valuations can soar, Kirani said.
This is largely because only a handful of AI-first companies are showing real traction and growing revenues— most others are still raising capital based on perceived potential rather than tangible results.
Venture capitalists are willing to pay this premium, encouraged by the potential of rapid growth in the AI sector. Expectations are now set for companies to achieve significant milestones, such as $100 million in revenue.
For example, an AI-first company growing from $1 million to $5 million and to $15 million in revenue could command a valuation three to four times higher than a traditional SaaS company growing at a similar pace, Swaroop added.