Inside 2am VC’s Investment Strategy
In India, where startup founders are young, technical, and quick to launch, the momentum is strong. But while adoption is rising, trust remains a hurdle. AIM spoke to the founders of investment fund 2am VC, who believe that companies in India take longer to grow compared to more mature markets like the US. “Companies take time to form because the markets take time to form,” said Brendan Rogers, one of the co-founders of 2am VC. Rogers added that in the US, even niche companies can become large because of deep market sizes. The same cannot be applied to India, as many markets are still maturing and are 20-30 years away from deep niche demand. Startups founded around 2015-2016 are hitting major growth milestones now, which indicates the extended incubation period required for success stories in India. This is why they argue that patience is critical for both founders and investors in India. 2am VC’s strategy of patience and focus on localised, application-based AI solutions positions them for long-term success in India’s startup ecosystem. Where Does AI Fit In? “We don’t really necessarily look at AI first. It’s just that every startup needs to leverage these new and upcoming tools,” said Hershel Mehta, the other co-founder, on how, in the future, every startup would be an AI startup. The firm, with offices in Mumbai, Bengaluru, Delhi NCR, and Los Angeles, is particularly interested in startups addressing consumer use cases, especially AI applications in education, language learning, and delivering frictionless user experiences. Mehta said that AI is fundamentally different from Web3 because AI has real, necessary use cases both inside companies and for consumers. AI is being actively used to solve critical operational problems, like automating internal tasks, improving productivity, and improving customer experiences. The fund prefers to back companies building at the application layer of AI, rather than those attempting foundational model development, which they acknowledge requires massive capital, typically readily available only in the United States. On India building a foundational model, Mehta said, “I’ll answer that with a question: Do you see how much OpenAI needs to raise to stay relevant? We must ask ourselves that question right from the start. Is that something we can see happening in India today? It will take time.” For context, in March 2025, OpenAI secured $40 billion in funding, achieving a post-money valuation of $300 billion in the largest private technology deal ever recorded. In terms of India’s foundational model efforts, the government recently selected Sarvam AI under its IndiaAI Mission to develop India’s sovereign large language model (LLM) as part of the effort to create indigenous AI capabilities. Sarvam AI is developing a 70-billion parameter multimodal AI model supporting Indian languages and English, with government-backed compute resources, after being chosen from 67 applicants. Localisation of Startups for Indian Markets 2am VC believes that while India’s ecosystem is very unique, it’s incomparable to the US. The closest competitor to the US is China, but its centralised governance is a hindrance. “Every company we see has to have an India nuance in building for India. It can’t just be an X for India. That doesn’t work,” added Mehta. The founders emphasise that India’s market is huge and demographically young, especially with Gen Z consumers rapidly becoming the core market for tech products. Mehta said that the key reason a consumer product succeeds in India is the country’s unique lifestyle. The way Indians eat, dress, or live in their joint families is very unique. There aren’t other large markets like India. He added that when you study the Indian unicorn companies, you’ll see that they solve major pain points for India, problems that are unique to the country. Which of the AI Startups are Actually Defensible? The VC firm assesses startups based on whether the founding team can consistently build, launch, and iterate quickly, and whether they can attract customers early on, even without a fully developed product. They check if the “co-founding team has the capacity to build and launch products and iterate consistently. How good is the technology? And do they have the ability to get early customers?” They’re sceptical of AI startups where the tech isn’t strong and customer acquisition is unclear.
The firm, based in Mumbai, Bengaluru, Delhi NCR, and Los Angeles, focuses on consumer startups, especially AI in education, and language learning.
The firm, based in Mumbai, Bengaluru, Delhi NCR, and Los Angeles, focuses on consumer startups, especially AI in education, and language learning.
["AI (Artificial Intelligence)", "venture capital"]
["Go", "API", "OpenAI", "AI", "venture capital", "RAG", "Aim", "ViT", "multimodal AI", "Rust", "R", "AI (Artificial Intelligence)"]
["AI", "multimodal AI", "OpenAI", "Aim", "RAG", "R", "Go", "Rust", "API", "ViT"]
I hold a degree in political science, and am interested in how AI and online culture intersect. I am at aditi.suresh@analyticsindiamag.com &amp; x.com/aditisuresh12