Venture Capital Firms Bet Big on AI-First Startups to Boost IT Services

New Delhi, Jul 8 (KNN) A growing number of India’s leading venture capital firms are investing in a new wave of AI-first startups aiming to boost the traditional IT services industry.

Firms such as Peak XV Partners, Stellaris Venture Partners, Accel, and Elevation Capital are actively scouting early-stage startups building AI-native solutions for application development, software testing, infrastructure management, and customer support.

Rajan Anandan, Managing Director at Peak XV Partners, noted that AI is making IT services more efficient and cost-effective, opening opportunities for startups to offer leaner, high-quality alternatives.

Peak XV is currently assessing startups that automate application maintenance and other core IT functions using AI agents.

Rather than replacing existing IT service giants, these AI-driven firms are being built from the ground up to deliver faster and smarter services.

Venture capitalists are focusing on both horizontal players addressing cross-industry needs and vertical startups targeting sectors like healthcare, banking, retail, and insurance.

Stellaris Venture Partners has already funded two such startups. Partner Ritesh Banglani emphasised India’s unique advantage in scaling tech-enabled services, especially in disrupting KPO functions such as accounting, legal support, and wealth management. “Tech-first service startups can build distribution faster than legacy firms can build tech,” he said.

Accel India is also bullish on AI-first ventures, particularly in verticals like legal, insurance, and accounting. Anagh Prasad from Accel believes these companies can deliver service-like pricing while earning software-level margins.

Krishna Mehra of Elevation Capital predicted a major shift in BPO, KPO, and customer support, with even legacy IT firms facing AI-driven transformations.

Industry data already shows a shift: IT revenue grew by 5.1 per cent in FY25, while workforce growth slowed to 2.2 per cent, indicating increased automation.

(KNN Bureau)