bengaluru/mumbai, June 11 -- India's venture capital ecosystem is undergoing a pivotal shift in 2025, with investors increasingly backing artificial intelligence (AI)-native startups over traditional software-as-a-service (SaaS) players. Between January and 4 June, AI-focused startups raised $454 million across 65 deals, edging past SaaS firms, which drew $432 million over 52 deals, according to data from Venture Intelligence. While some overlap exists as SaaS companies adopt AI features, the trend points to a deeper reset in investor priorities. "AI-led startups are commanding 3-4x valuation premiums over traditional SaaS businesses, thanks to their potential for faster scalability and deeper, more transformative use cases," said Abhinav Chaturvedi, partner at Accel. However, to stay competitive with pure-play AI startups, many SaaS companies are now streamlining operations and aggressively investing in artificial intelligence, according to multiple industry executives. This trend is pushing established SaaS companies to retool quickly. "If SaaS companies don't integrate AI, they are unlikely to survive the next 2-3 years," said Nitin Bhatia, managing director at DC Advisory. "We're seeing the switch happen where pure-play SaaS startups don't exist anymore. AI is becoming a fundamental part of what they offer-whether it's to enhance customer experience or product capabilities." This transition is also shaping the investment strategies of venture capital firms such as Stellaris Venture Partners, Bessemer Venture Partners and Accel, who see the convergence of AI and SaaS playing out across their portfolios. Chaturvedi pointed to SaaS companies like Chargebee, which is exploring new monetization models like usage-based pricing and BrowserStack and Testsigma, which are embedding AI to automate testing-showing how legacy players are not just adapting but helping shape transformation. Some of the largest AI-linked fundraises this year include Netradyne's $90 million, SpotDraft's $54 million and Infinite Uptime's $35 million rounds, according to Venture Intelligence data. The shrinking gap between AI and SaaS deal volumes shows rising investor appetite for pure-play AI models. Deal data reflects this shift: in 2024, there were 193 SaaS deals versus 145 AI deals. A year earlier, SaaS saw 159 deals compared to just 96 in AI. While SaaS still leads in terms of overall capital raised, AI startups are quickly gaining ground with more focused, domain-specific solutions. Even within traditional SaaS portfolios, companies are recalibrating. "Our existing SaaS portfolio companies are investing aggressively in AI capabilities. From Whatfix in the digital adoption space to Factors in marketing automation, most of our portfolio companies are already using AI to add features, increase convenience and reduce cost for their customers," said Ritesh Banglani, founding partner at Stellaris Venture Partners. He said over 80% of Stellaris' B2B SaaS deal flow is now led by AI-centric solutions. "This shift will transform every process within an enterprise from marketing and sales to accounting and finance."...