By mid-2024, the Indian SaaS landscape reached a turning point. AI was no longer an edge or an innovation layer; it had become a foundational pillar for SaaS and software development.

Inc42 reported that AI startups comprised nearly 40% of new SaaS ventures funded in 2024, a sharp leap from 19% in 2022. In total, Indian SaaS startups raised over $2.1 Bn in 2024, up 31% YoY. A growing chunk of this capital is flowing toward companies that are not just building on AI, but being built by AI.

The shift is clear even in boardroom conversations or pitch meetings. Investors now probe product architecture with surgical precision. The question isn’t simply whether a company uses AI — it’s how deeply AI is embedded, whether it creates a durable moat, and whether it meaningfully improves the startup’s economics and defensibility.

“An AI-native SaaS firm is created with AI at its foundational level,” says Ankur Mittal, cofounder and partner of Inflection Point Ventures, adding, “These businesses constantly train and enhance their algorithms using private data, creating a defensible tech moat that is hard to replicate. In contrast, typical SaaS providers frequently patch AI onto existing systems, providing only incremental gains rather than radical revolution.”

This distinction is becoming crucial to funding decisions. Indian SaaS is no longer chasing AI adoption—it’s being rebuilt around it. And this evolution is rapidly reshaping investor priorities, frameworks, and thesis.

Ashwin Raguraman, founding partner at Bharat Innovation Fund, believes that once the power of AI itself became evident, it compounded, especially as compute power increased.

The capabilities that were there back then at a certain level have dramatically advanced today. Users are more aware. Interfaces are more intuitive. People can describe a task, toss in a prompt, even if they’re not tech-savvy, and get meaningful results.

There’s now a common understanding of how to use AI. That’s made a huge difference.

From Cloud-First To AI-Native SaaS

Before we go further, it is important to rewind the clock and understand India’s SaaS journey. The SaaS ecosystem has come a long way from making software more accessible to now fundamentally reshaping how intelligence is built into applications.

In the early 2010s, the appeal of SaaS was straightforward: cloud-native tools that were easy to deploy, cost-effective, and didn’t require complex on-premise infrastructure. Businesses of all sizes could access software on demand, paying monthly and scaling as needed.

This ease of use created the perfect environment for workflow applications to thrive — CRMs, billing software, customer support — products built for efficiency. Indian SaaS startups, in particular, found success by tailoring these tools for mid-sized and emerging enterprises.

But things started to shift. With growing public cloud infrastructure and better digital readiness, SaaS began consolidating into unified platforms. Instead of scattered point solutions, companies started offering end-to-end cloud-native experiences.

And then came generative AI.

The rise of GenAI around 2018 didn’t just enhance SaaS — GenAI resulted in reinvented models.

Traditional SaaS solutions became........

© Inc42