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Bessemer Venture Partners (BVP) is betting on artificial intelligence (AI) to rattle India’s vast $264-billion IT services industry, long the bastion of billable hours. The early-stage venture capital fund plans to ramp up investments in AI-first startups over the next few quarters.Nithin Kaimal, partner and chief operating officer, BVP, said the fund will focus on seed-to-early-stage AI-first companies led by founders with deep domain expertise. "The AI-enabled services and software sector is unique and nascent. We can enter the space starting from pre-product, pre-revenue companies up to seed or series A.".According to the fund's AI services roadmap, the industry's revenues and margins have remained stable despite initial fears of disruption, creating a window for startups to capitalise on the constraints faced by established players.Earlier this month, life sciences firm Graph AI, which raised $3 million in a seed round led by BVP, was among the fund's first bets in this thesis. Kaimal said the fund also invested in healthtech company Teleradiology Solutions and SaaS startup ShopDeck."Beyond that, there are at least five or six teams we are talking to, to close a deal. We are spending a lot of time and planning to deploy more money in this over the next few quarters," he said.Cracks in the old modelBVP sees an opening for AI-native startups in IT, as adoption of the technology in the industry is still limited. In a report released on Tuesday, the fund stated that 70% of IT revenues comes from time and material contracts, a model that rewards billing hours instead of driving client efficiency or outcomes, which is directly at odds with AI adoption. Then there’s the IT workforce pyramid, which is heavily weighted towards junior staff (60% of headcount), and noted that incumbent R&D spending is minimal, often under 1.5% of revenue, compared to over 20% for leading product companies. These issues, the fund argued, create an opening for AI-first solutions to scale.Kaimal explained the three pockets of AI-enabled startups the fund finds opportunity in:Software: AI-driven platforms that fully automate repeatable workflows, like agents in call centres or those used for data processing.AI-enabled services: These are startups that apply AI to complex processes but maintain a human-in-the-loop (HITL) model for oversight and decision-making.Technology services for AI: This is a relatively new category focussed on enabling AI adoption itself. These include services like training for large language models (LLMs).The report states that the best companies in this space will demonstrate rapid deployment, achieving value for enterprise clients in less than one quarter. It projects that India’s IT services industry will exceed $400 billion by 2030 as AI reshapes technology sourcing and delivery.
