Why Together Fund is bullish about the Gen AI wave

In early 2023, the entrepreneurial bug bit Dushyant Mishra, then my colleague at Together Fund. An Indian Institute of Technology (IIT) Kharagpur grad, he had worked with Abbott for almost five years before joining us for a couple of years. What tipped the scales for him into entrepreneurship was OpenAI’s release of ChatGPT 3 on November 30, 2022 – the Gen AI moment. We didn’t want to come in the way, and asked him to incubate what would become RapidClaims.AI at Together Fund.

Dushyant, Abhinay Vyas (a data scientist who has worked at Novartis), and Jot Sarup Singh (ex Postman, ex Goldman Sachs) started RapidClaims to make a mark in the $141 billion global healthcare revenue cycle management market.

RapidClaims’ AI-powered algorithms ensure accurate medical coding and compliance in the RCM industry to enable hospitals and healthcare enterprises to get insurance claims faster than before. Just to put that in perspective, RCM processes are highly complex. It entails attributing medical prescriptions and patient case histories to the right medical codes from 100,000 codes.

At Together Fund, we could see why entrepreneurs like Dushyant, Abhinay and Jot swept into action months after the ChatGPT moment.

The recent shift from overoptimism to cautious optimism in the Gen AI market, highlighted by Goldman Sachs’ report, "Gen AI: Too Much Spend, Too Little Benefit?", hasn’t shaken our belief. From the start of 2023, we've seen the Gen AI wave as a transformative force, with start-ups like RapidClaims competing against established players like Codametrix, Nym, and Fathom.

Strategic Vision and Early Adoption

We understood early on that AI will be a long-lasting trend, and took a call on that. At first, everybody in the start-up ecosystem was trying to understand the AI wave. We were seeing 15 to 20 deals a month. The AI deal flow has now scaled up to 100 deals a month. This surge is a result of our active engagement with the SaaS and AI communities.

In May 2023, Together Fund hosted ‘Tinker Together’, an AI mixer with more than 25 founders/ operators. We followed it up with a four-hour webinar on ‘SaaS in the age of Gen AI’ for current founders as well as new ones. It was to collectively think about frameworks to build SaaS (software as a service) products in an AI-first world. You can find an edited version of the webinar here. Over 15 months, Together Fund has done nearly 20 events for founders and the developer community from Bengaluru and Pune, to New York and San Francisco.

This has helped us meet nearly 700 GenAi start-ups, almost 80% of which are focused on building applications. It hasn’t surprised us because right from the heyday of India’s IT offshore services, application development has been a key part of business. In the SaaS era, we have seen companies like Zoho and Freshworks become multi billion-dollar businesses in revenue. India possesses an innate prowess in applications.

Diverse and Impactful Portfolio

More interestingly, the diversity of the founder group in our portfolio companies is heartening. There are second-time founders who have previously built a company and scaled it to a successful outcome (Spry, ScaleKit, Protecto.ai ), as well as first-time founders (ZipStack, Hunar.ai , Spendflo) who have been senior technology leaders in scaled tech-first companies, such as Freshworks, Zoho, Microsoft and Uber.

Many of the founders are graduates of tier-1 colleges like the IIT, Indian Institutes of Management, and Ivy League institutions who have worked in tech or product roles in start-ups (Jhana.ai , RapidClaims.ai , Composio.dev).And not to forget – first-time founders from tier-2 cities like Surat, Nagpur, and Coimbatore (Dhiwise).

This is an incredible validation of what we sensed in the first few months after ChatGPT launched. Gen AI requires founders to reimagine how they think about the business itself end to end – from product development and user interface to distribution and workflows.

Frameworks for Gen AI Opportunities

At Together we have identified the following key areas to capitalise on AI opportunities from India:

Applications: Start-ups harnessing Gen AI for productivity and AI-led operations in healthcare, legal, and finance.

Until AI arrived, several market opportunities were simply not available to software product businesses. Take document automation, for instance – the task of entire summarisation and automation. It led to the growth of the knowledge process outsourcing (KPO) services industry. With GenAI, that opportunity is ripe for automation.

We have already seen Presentations.ai one of our portfolio ventures, grow to 3 million users in less than one year, enabling everyone to create awesome presentations instantly. Such velocity would have been hard to imagine in its segment in the pre-Gen AI world. Its market is estimated to have more than a billion users. That’s the opportunity.

Infrastructure: Ventures in Agent automation, testing, security, and privacy, like Securden, Composio and Privado.

In our portfolio, Securden, founded by Zoho alum Bala Venkataramani and Kumaran Balan, is a start-up in the security and privacy segment. The AI-powered platform is designed to prevent identity thefts and cyber attacks in the $25 billion privileged access management market. The venture has more than 650 enterprise clients in the healthcare, financial services and IT services markets. And there is Privado, in privacy compliance and data protection markets, has been able to secure marquee enterprise clients.

Healthcare and Lifesciences: There are selective ventures developing in this space, like RapidClaims.AI which I cited earlier. There is also Spry, which operates in the $6-billion rehab providers enablement market, and a stealth mode venture that we are excited about.

Services: In Hunar.AI, we saw a unique case of Gen AI being used to make high-volume hiring of the workforce simpler. It has incredible applications in sectors that are people-intensive, from financial services, and e-commerce, to logistics, retail, consumer goods, and energy.

Consumer: Another portfolio in stealth mode is harnessing AI in its text-to-game platform for game developers. It is pioneering the idea of short-form gaming – the equivalent of Reels – to enable users to generate games from simple text prompts.

As products have become easier to develop or create now, founders will have to think about: What will the moat in my business be? What will the differentiation be going forward? But the early signs are extremely promising. They have to also carefully decide which segments to enter because incumbents have a large advantage because of data.

In the past year, I have seen two parallel thought processes among founders. First, the founder was grappling with the question if this Gen AI is a real wave or not? And, what kind of implications it could have. Accepting that the wave is of real impact has been the first vital thought process.

Second, once founders recognise Gen AI for what it is, they begin to respond to how everything is set to change. Yes, enterprises will take much longer to adopt AI-based tools and products because AI is a black box. For example, a freight and logistics company will not begin to deploy an AI-based tool for core functions like shipments and their production systems – they are aware there is the risk of AI hallucination. That said, enterprises have been quick to start pilots because the productivity gains of Gen AI are huge.

The Road Ahead

Despite uncertainties as hyperscalers and Big Tech increase their AI investments, we remain confident. The Gen AI wave parallels past technological disruptions, such as the browser and cloud eras, both of which created multi-billion-dollar ventures.

Embracing the Future

The AI wave represents a 1000X disruption in productivity and automation. Founders must now reimagine their businesses from product development to distribution. It's no longer just SaaS; it’s SaaS and AI. This pivotal moment requires vision, innovation, and a willingness to embrace change.

At Together Fund, we are proud to lead the charge, supporting founders who are redefining the future. Our unwavering belief in the power of Gen AI and our strategic foresight makes us the best AI fund, ready to ride this transformative wave and create lasting impact.

Explore the future with us. Together, we ride the AI wave