VCs on AI flight to valley

Economic Times

3 days ago

ETtech Indian venture investors are setting up shop in San Francisco, the AI epicenter, as they chase cutting edge development of the technology and aim to spot the next wave of AI trends.
Multiple Indian venture capital companies, such as Elevation Capital and Peak XV, have set up shop at AI epicenter, San Francisco, in the US to tap into the booming industry.
In addition to this, investors are spending more time in San Francisco or SF as it is called, as the pace of AI development grows unabated in the region.
Elevation Capital recently hired Capillary Technologies cofounder and former Meta executive Krishna Mehra, as the AI partner, with more people from the team spending significant time in the US. Peak XV has set up an office in SF, and has hired Arnav Sahu, former Y Combinator principal, to drive investments. Blume Ventures' managing partner Sanjay Nath is spending time in San Francisco and India. ET has also learnt that VC firm Z47 is looking to expand its presence in San Francisco, in the US. The email sent to the company did not elicit any response till the time of publishing.Krishna Mehra, AI Partner, Elevation Capital, who is based in Palo Alto, quipped that it is now easier to meet a VC in the Valley than in Bengaluru. 'I end up meeting more people from the investment community there,' he says.There are a few things driving this.
SFO playbookMehra explained that this is a combination of more action happening in the US and the need to be closer to understand what is happening in the region and where the buck is going. 'There is a lot of cross border action happening as well, which being there helps to a certain extent,' he added. Two Bengaluru-based investors ET spoke to said that they are travelling to the US more often to understand how the technology is evolving. 'Travelling there iseye-opening in terms of what is happening in AI and the kind of talent density that is available there,' one of the investors said.Anand Krishna, founder, Inkle, a US accounting and tax automation startup, said this is happening globally as well. For instance, he highlighted that a global accelerator, which had originally encouraged founders to start the company wherever they were, is now encouraged to move to the US.'Their original pitch was that build wherever you are, talent is everywhere and sit anywhere in the world. This was 10 years ago,' Krishna said.'This is because the early-stage AI startup has centralised itself to San Francisco city, which has become centre of gravity for startups and foundational model companies. This has eroded Silicon Valley's relative historical dominance over SF, as thousands moved to or launched in the city,' he explained.
This includes OpenAI and Y Combinator companies that are in SF that have created a concentration of talent in the region resulting in a vibrant AI ecosystem, attracting investors, startups and techies. 'Now you will see entrepreneurs and investors all over the world making pilgrimages to SF every six to 12 months,' Inkle's Krishna says.
What are investors doing in the US?Indian investors have been investing aggressively in the AI space in recent times. With a lot of startups in the AI space moving to the US, it is also becoming important for investors to help them with the networks.
ET had earlier reported that a number of AI startups such as Smallest.ai, and Composio have moved to SF to tap into this ecosystem. Early this year, Sarvam AI, which is building an Indic foundational model, launched Sarvam Labs in the Bay Area in the US in March in LightSpeed office in Menlo Park, US.Sateesh Andra, managing director, Endiya Partners, who has been spending 3-4 months a year in the US, said, 'They (portfolio startups) need connections and networks. So, helping them becomes very important,' he said. But he does not see himself spending more than that in the region.Elevation Capital's Mehra said that in the last two years they have invested in 15-20 companies, compared to the norm of five or six before, primarily driven by AI. 'There is a lot of potential to build category leading companies, some of them in India. But some of them are easier to do in the US. That is why founders are moving early, and the pool is much larger. This might change in five years,' he said. Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. Inside TechM CEO's 'baptism by fire' and the blaze he still needs to douse
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