Bengaluru, May 8 -- Indian venture capital firms are expected to increase the number of investments in startups building applications for artificial intelligence in 2025 following improvements in the tooling and infrastructure layers of the technology, according to industry veterans. "We are seeing a lot more application-layer pitches from founders. Our investments will likely be weighed more heavily there," said Hemant Mohapatra, a partner at global VC firm Lightspeed Venture Partners. "We're very active in the market." It's a sentiment that's echoed by the largest VC firms in the Indian market including Lightspeed, Accel India and Peak XV Partners (formerly Sequoia Capital India and Southeast Asia). Lightspeed said its cheque sizes for AI startups would vary, depending on a company's technology. Its investments have ranged from $3.5 million with a recent Pre-Series A round in Stimuler, avoice-first AI tutor for English-as-a-second language, to leading foundation model company Anthropic's $3.5 billion Series-E round earlier this year. "We look for extraordinary founders who are going after large markets. We're just seeing more AI companies," said Rajan Anandan, managing director at Peak XV. The firm said it doesn't reveal the size of investments it makes in startups. "It's not an increase as a strategy but more because for every one foundational company there are 10,000application-layercompanies," said Prayank Swaroop, a partner at Accel, a global VC firm. "By the law of large numbers, application-layer investments will be a lot more not just for us, but for other Indian VCs, even for VCsall over theworld." A part of the reason for the shift towards the application layer is the significant improvement in middleware, the software that connects operating systems to applications, data and users. It's the 'glue' that links various moving parts, allowing them to function seamlessly. As a result, AI startups aren't building horizontal platforms anymore. They're focusing on vertical solutions. Many AI startups from India are building vertical AI agents - targeting the US as well as Indian markets. "Startups are building for banks, insurance, retail, healthcare, construction, even real estate. Vertical AI is a mega theme, followed by building for the tooling and infrastructure layers," said Anandan. According to Accel, a global VC firm, three trends have emerged over the past few months in India: The shift to agentic applications, and the ease and convenience of building AI applications have contributed to boost in the ecosystem. Companies such as Cursor, Windsurf and other 'vibe-coding' platforms have made the barrier to build applications very low. Due to these preceding trends, applications with better solutions are being built in India's AI ecosystem. "Founders will be building software for testing of applications, data management and cybersecurity," said Swaroop. "When people make so much software, they realise there are problems and start solving for them as well." Startup founders have noticed the improvements in infrastructure as well, given that algorithms have advanced significantly over the past 18-24 months. "The quality of applications, the complexity which we're able to build for enterprise applications is superior and at the same time, at much lower cost than what was available two years back," said Saurabh Mishra, co-founder and chief executive officer of OrbitShift....