AI startup funding heats up: MStack AI in talks with Alpha Wave, Lightspeed, Prosperity7; Simplismart with Peak XV, others

Funding activity in India’s artificial intelligence startup ecosystem is showing fresh signs of acceleration, with investors stepping up conversations with companies across the AI stack and existing backers returning with larger cheques.

MStack to raise at least $30 million

MStack AI, an AI-native chemical research and development (R&D) and manufacturing startup, is in advanced discussions to raise at least $30 million in a fresh funding round, people aware of the developments told Moneycontrol.

The company is being valued at around $230 million pre-money, according to one of the people cited above. The round size could also increase to $40-50 million as discussions with investors progress and interest in the company firms up, a second person said.

The post-money valuation of MStack could be anywhere between $260 million and $280 million, the second person added.

Existing investors Alpha Wave and Lightspeed are likely to contribute a significant portion of the round at MStack, while Prosperity7 Ventures is in talks to come in as a new investor with a smaller cheque, the first person said.

MStack AI, Alpha Wave and Lightspeed did not respond to Moneycontrol’s queries.

Simplismart stitches together fresh $50 million round

As MStack’s fundraising talks progress, generative AI startup Simplismart is also in discussions to raise around $50 million in a fresh round, underscoring the growing investor appetite for AI startups, per sources.

Peak XV Partners is in talks to join as a new investor with a likely investment of around $30 million in Simplismart, a person aware of the discussions told Moneycontrol.

Tech titan Nvidia is also in discussions with the company and could participate in the round, a second person said.

The remaining capital, of the planned $50 million round, is expected to come from existing investors, including Accel, Dallas Venture Capital, Shastra VC and others, the people said. Separately, news website Entrackr had also reported that Simplismart is raising capital from a set of existing investors.

Simplismart is being valued at around $120-140 million during ongoing negotiations.

Peak XV Partners, Simplismart and Nvidia did not reply to Moneycontrol's queries.

MStack AI and Simplismart are among a growing set of Indian AI startups now either raising capital or actively talking to investors.

The activity marks a notable change from the relatively cautious funding environment for AI startups over the past couple of years in India, the world’s third-largest startup ecosystem, when investors were still trying to separate companies with genuine technological moats from the rush of startups building on top of third-party models.

Over the past months, Moneycontrol has exclusively reported on a series of AI startup funding discussions, pointing to a broader increase in investor activity across the sector.

Workplace AI startup Ema, for instance, is in talks to raise around $80 million from Creaegis and existing investors at a valuation of $800 million, sources had earlier said. Separately, at least half a dozen AI startups have also been in discussions to raise capital, with investors such as Claypond Capital, Accel, Arkam Ventures, Binny Bansal and Albinder Dhindsa, among others, exploring opportunities, as reported earlier.

The recent activity follows Moneycontrol’s earlier reporting on large fundraises by foundational AI startup Sarvam AI and AI application-building platform Emergent, both of which subsequently announced sizeable funding rounds and are among the largest fundraises this year.

It is not just startups that are beginning to move faster.

As more investors look to establish a position in AI, dedicated funds are also raising larger pools of capital to back the next generation of companies. Together Fund, the AI-focused venture fund founded by Freshworks founder Girish Mathrubootham, is in talks to raise around $150-170 million for its third fund. Discussions are also underway to potentially take the corpus closer to $200 million, Moneycontrol exclusively reported earlier.

The fundraise reflects Together’s own shift towards AI. The fund began with a broader focus on SaaS but has increasingly repositioned itself around artificial intelligence as the technology has moved from being a niche investment theme to a much larger part of the startup market.

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