Introduction: The AI Revolution’s Unexpected Epicenter

Picture this: A small team, on the brink of shutting down after a decade of struggle, suddenly skyrockets to a million users in just 84 days, the fastest growing productivity app of all time to hit the 1 million milestone.

This isn’t a tale from Silicon Valley—it’s the story of Presentations.AI, and it’s happening right here in Bengaluru, India.

As we approach the two-year anniversary of ChatGPT’s launch, a quiet revolution is brewing in the world’s largest democracy.

While tech giants battle over who can build the biggest AI model, India is writing a different story—one of focused innovation, deep expertise, and vertical domination in the AI space.

This is a story that validates Together Fund’s core thesis on AI— “India’s future in GenAI space is vertical”.

Countless opportunities lie in building AI-driven applications based on industry knowledge. We believe there are over 500+ untapped vertical opportunities for founders in India’s application layer, where domain know-how can be translated into world-class products.

Much like Presentations.AI.

The Presentations.AI Phenomenon: A Microcosm of India’s AI Strategy

In 2012, Sumanth Raghavendra embarked on a mission to simplify presentation creation. Fast forward to 2023, and his company, rebranded as Presentations.AI, is a testament to India’s unique approach to AI:

1. Domain Expertise: A decade of understanding the nuances of presentation narratives and design.
2. Carpe Diem – Seizing the Opportunity: Leveraging generative AI at the perfect moment.
3. Explosive Growth: From struggling startup to a million users in less than three months.

Sumanth’s words capture the essence of this transformation: “We had built this AI platform for years in a pre-GPT world. It was like trying to build a spaceship with stone tools. Then the generative AI tsunami hit, turning our headwind into a tailwind.”

This success story perfectly illustrates India’s edge in the Gen AI world: applications that draw from deep domain expertise.

The Shift from Foundational Models to Verticalization

While global tech giants like Google, Microsoft, and Meta race to build the largest foundational models, Indian founders are uniquely positioned to focus on verticalization: defining specific problems, understanding customer needs in niche markets, and executing effectively.

Building large language models (LLMs) requires vast resources. Even Sequoia Capital has pointed out that applications, especially AI-led verticals, are where the true value lies. The capital-intensive nature of foundational model development makes verticalization a smarter play for founders looking to innovate with fewer resources but greater focus on solving specific business problems.

Why Verticalization is India’s Trump Card

While the West focuses on building larger, more general AI models, India’s strength lies in its laser-focused approach to solving specific industry problems.

Here’s why this strategy is a game-changer:

1. Resource Efficiency: Building specialized AI requires less computing power and data than general models.
2. Quick Time-to-Market: Focused solutions can be developed and deployed faster.
3. Higher ROI: Solving specific problems leads to clearer value propositions and faster adoption with pragmatic business models and viable unit economics.

“In the AI gold rush, it’s not about who has the biggest shovel, but who knows exactly where to dig.”

India’s Legacy in Applications

India’s strength in application development is not new. For decades, we’ve built a reputation for world-class software, contributing significantly to the $254-billion IT services and business process management industry. This focus on applications stems from a unique historical context. During pre-liberalized India, strict regulations stifled the growth of hardware and infrastructure, but software development flourished as a liberating tool for innovation.

Companies like Zoho and Freshworks led the charge in creating an inbound motion SaaS model from India. When I founded Eka Software Solutions, we capitalized on my deep knowledge of commodity trading markets to build a specialized software solution. We didn’t get distracted by technology for technology’s sake; instead, we solved specific problems for commodity traders.

Similarly, in today’s Gen AI era, Indian founders have an incredible opportunity to do the same — build solutions rooted in domain expertise.

Today, we have over 6,500+ companies focused on various markets, building solutions for India and the world.

This legacy provides a strong foundation for India’s push into verticalized Gen AI applications.

Five Key Areas for Vertical Applications in the Gen AI Era

1. The Evolution from Co-Pilots to Agentic AI

Co-pilots were among the first AI tools to become mainstream, offering real-time suggestions and assistance. Now, we’re witnessing the rise of agentic AI—autonomous systems that independently perform tasks based on predefined goals. These AI agents are transforming user experiences, and any vertical-focused startup needs to consider how agentic AI can streamline workflows in their domain.

Example: Composio, backed by Together Fund, integrates AI agents with APIs to help enterprises automate complex processes. This type of AI-driven automation is becoming essential for businesses across various sectors.

Market Insight: According to a report by Grand View Research, the global intelligent virtual assistant market size was valued at USD 2.48 billion in 2022 and is estimated to grow at a compound annual growth rate (CAGR) of 24.3% until 2030.

2. Automation of Software Engineering

Generative AI isn’t just about flashy new applications; it’s about transforming how software is built. From code reviews to testing and even documentation, AI can now automate large portions of the software development lifecycle, cutting costs and speeding up time to market. For startups, embracing this automation can mean the difference between surviving and thriving

Example: Dhiwise, a startup in our portfolio, helps developers build web and mobile applications rapidly by automating the application development lifecycle and generating modular, reusable, and readable code for Flutter, React, and Node.js.

Market Insight: Gartner predicts that 75% of Enterprise Software Engineers Will Use AI Code Assistants by 2028.

3. AI-Led Services Firms

AI is also transforming traditional services firms into AI-led services providers. Traditional services firms are evolving into AI-led service providers, significantly enhancing efficiency and scalability.

Example: Hunar.ai, one of our portfolio companies, uses conversational bots for hiring frontline and non-IT workforce. Its AI-driven approach has reduced turnaround time and improved recruiter productivity. Imagine an employer branded, WhatsApp verified bot that drives employer branding and candidate engagement at the same time! That’s how Hunar.ai is looking to transform a traditional services activity like hiring.

Market Insight: The global AI in recruitment market is projected to reach $2.6 Billion by 2033, from $0.8 Billion in 2023, growing at a CAGR of 12.4%, according to Market Research Future.

4. Healthcare Automation and Productivity

AI is revolutionizing healthcare processes, from diagnosis to administrative tasks. AI-led automation is revolutionizing document-heavy industries, creating efficiencies that were previously the domain of outsourcing firms.

Example: RapidClaims is transforming healthcare revenue cycle management with AI. Its platform automates medical coding, improving billing accuracy and reducing time spent on manual tasks.

Market Insight: The global AI in healthcare market is expected to reach $194.4 billion by 2030, growing at a CAGR of 38.4% from 2022 to 2030, as per Grand View Research.

5. Security and Privacy in the Gen AI Era

As AI systems handle more sensitive data, robust security and privacy measures are becoming critical. All organizations, big and small, need to focus on protecting personally identifiable information (PII) and ensuring compliance with global privacy regulations. This is especially important as more countries introduce data protection laws. Companies must integrate strong compliance layers to protect both their businesses and their clients.

Examples:

• Our portfolio company, Privado is shifting privacy left to engineers, adding privacy checks in the development lifecycle. Its Privacy Code Scans help engineers and privacy teams get visibility into personal data usage by their products and apps. They can also monitor personal data flows, and detect privacy risks that exist in the code from data leakages.
• Another startup that we have backed, Protecto, provides data security as a service, offering intelligent tokenization to help enterprises gain user trust in their Gen AI-powered products.

Market Insight: The global AI in cybersecurity market is projected to reach $60.6 billion by 2028, growing at a CAGR of 21.9% from $22.4 billion in 2023 according to MarketsandMarkets.

The Global AI Chessboard: India’s Unique Position in the Global AI Landscape

While India may not be leading in the development of foundational models, its strength lies in applying AI to solve specific industry problems. This approach aligns well with India’s historical strengths in software development and domain expertise across various sectors.

Compared to other tech hubs, India’s advantage is clear:

India’s edge? A perfect storm of a vast pool of software talent, deep domain expertise, and a massive domestic market for testing and refinement.

Challenges and Opportunities

Despite the promising outlook, Indian startups in the Gen AI space face several challenges:

1. Access to high-quality training data
2. Funding constraints for AI research
3. Competition from global tech giants
4. Regulatory uncertainties

However, these challenges also present opportunities:

• Leveraging India’s vast and diverse population for data collection and testing
• Focusing on cost-effective, scalable solutions for nascent and emergent markets
• Collaboration with global tech firms for early access to advanced AI models in a “coopetition” model
• Proactively engaging with policymakers to shape favorable AI regulations

Looking Ahead: Other Emerging Trends and Predictions

1. Hyper-personalization: AI-driven personalization will extend beyond e-commerce to sectors like education, healthcare, and financial services.
2. Edge AI: As 5G rolls out across India, we’ll see more AI applications running on edge devices, enabling real-time decision making.
3. AI in Local Languages: Expect a surge in AI applications catering to India’s diverse linguistic landscape.
4. Green AI: As environmental concerns grow, there will be a focus on developing energy-efficient AI models and applications.
5. AI Governance Frameworks: India is likely to introduce comprehensive AI governance policies, balancing innovation with ethical considerations.

Your Roadmap to AI Success: A 5-Step Guide

1. Find Your Niche: Focus on a specific industry or problem where you have deep domain expertise or understand deeply
2. Think Big, Start Small: Begin with a focused application, but design for scalability.
3. Win Your Niche: Leverage your focused solution as a thin wedge to win in your niche.
4. Leverage Ecosystems: Collaborate with investors, hyperscalers, incubators, and larger firms to run as frugally as possible.
5. Expand Your Footprint: Stay updated through workshops, conferences, and online courses

Conclusion: The Time is Now

For the first time, AI has the power to both create and reason.

With companies like Alphabet, Microsoft, and Meta continually pushing the boundaries of LLMs, there is immense potential to build domain-specific applications on smaller, more cost-efficient models.

And this is where India’s real strength lies.

The principles of the value SaaS era still apply today: focus on solving customer problems, ensure a high NPS, and grow alongside your customers.

But in this new era, success will come from not just building technology but applying it effectively in verticals.

India stands at a unique crossroads in the global AI landscape. We have the talent, the market, and now, the momentum. By focusing on verticalized AI applications, we’re not just participating in the AI revolution—we’re shaping its future.

The question isn’t whether India will play a significant role in the AI era. The question is: Will you be part of this historic transformation?

The AI tsunami is here.

It’s time to ride the wave or risk being swept away.

What’s your move?