Indian VCs turn to US AI startups in search of bigger returns

Indian venture capital firms Peak XV Partners, NuVentures, DeVC and Activate are increasingly investing in artificial intelligence (AI) startups founded by non-Indians, drawn by the prospect of higher returns and opportunities to deepen enterprise relationships, some investors told ET.

In 2025, Peak XV Partners invested in more than 10 US-based AI startups, including backend platform Supabase and AI analytics company PostHog, both founded by non-Indians. Activate, an AI-focused early-stage fund, has backed ElevenLabs.

DeVC invested in six US companies last year, along with Y Combinator, Andreessen Horowitz and Bain Capital Ventures. Among them is Answers.ai, founded by Zhou Li.

Venk Krishnan, cofounder of NuWare and NuVentures, told ET the company is evaluating three US-based startups across AI, robotics and the agentic space. “We are not seeing enough innovative companies in the AI space in India, and we are looking at US firms for investments,” he said. About 90% of NuVentures’ investments are going to US-based AI companies.

Over the last two years, AI has become one of the biggest global themes and has attracted big investments. “But if you look at India, barring a few companies, there are not enough companies in India that will give outsized returns, especially for larger funds,” a Bengaluru-based investor said on the condition of anonymity.

Venky Harinarayan, founding partner at Rocketship.vc, said that though activity is picking up in India’s AI segment, the volume is low. The firm has not invested in India-based AI entities. NuVentures’ Krishnan said the company is using its relationship with customers and connections to invest in the US.

While companies such as Peak XV have established a dedicated base in the US, investors are also tapping into Y-Combinator-backed startups and are stepping up their presence in the region. Experts said the number of financing deals Indian investors are striking in the US has increased over the last few years.

Activate cofounder Aakrit Vaish said the company’s investment in ElevenLabs was strategic. Activate will partner with the firm to build the voice AI ecosystem on the ground. According to sources, Activate’s investment in Wispr Flow was driven by similar reasoning.

What is the right to win?

While momentum is building, breaking into the US market remains a challenge for Indian investors because of the presence of marquee investors. Krishnan said it is difficult for Indian entities to compete against US-based investors in the US market. “Companies we are speaking to in the US have come from our customers’ referrals. We also need to take more risks than the US counterparts to have a right to win,” he said.

This is one reason large venture capital firms such as Peak XV Partners and Elevation Capital have expanded their presence in the US. While Z47 is preparing to set up operations there, with partner Aakash Kumar relocating to the region, other Indian investors, including Stellaris Venture Partners and Antler India, are also spending more time in the US.