Karnataka’s startup ecosystem, predominantly concentrated in its capital Bengaluru, has jumped seven positions to rank 14th in The Global Startup Ecosystem Report (GSER) by Startup Genome.

This marks a record leap for the state and places it among the top global hubs. Karnataka is the only Indian city to feature in the global 40 ranking. While other Indian states like Telangana, Tamil Nadu, and Kerala were part of the report, they were included in the emerging startup ecosystem and not in the top tier. 

The report, released on June 12 in France, presents a comprehensive assessment of the global startup ecosystem. It analyses over five million startups across 350 ecosystems using metrics such as funding, talent, market reach, AI readiness and more. 

Bengaluru’s Growing Ecosystem

Bengaluru’s ecosystem, driven by fintech, space tech, and AI, reached $136 billion in 2024. The city is home to over 16,000 startups and secured 47% of India’s startup funding that year. The report stated that Karnataka’s initiatives like INNOVERSE and Local Economy Accelerator Programme (LEAP) support deep tech innovation by financing up to $36 million for emerging technologies. 

In conversations with AIM, Ekroop Caur, Karnataka secretary of the electronics, IT, biotechnology, and science and technology department, said that Bengaluru’s recent improvement in the Startup Genome report can primarily be attributed to the strong performance of its startup ecosystem. 

Several factors contribute to this, including the total investment flowing into startups, the number of exits that have occurred, and the number of companies that have gone public through IPOs. 

She highlighted Karnataka’s direct funding initiatives through programs like Elevate, alongside the operation of 18 centres of excellence that incubate startups. Notably, some centres collaborate with institutions like the Indian Institute of Science (IISC), providing high-quality support to incubate and nurture successful startups.

“Programs like Semiconductor Fabless Accelerator Lab (SFAL) and the collaboration between startups and GCCs demonstrate the overall ecosystem running active startup engagement programs,” Caur said. “Furthermore, Karnataka has a large VC presence, with nearly every VC operating in India having a base in Bengaluru. All of these factors combined have contributed significantly to [the state’s] success.” 

Karnataka’s Future Plans and Initiatives

The Indian city has also been ranked fifth among the top 50 AI-innovating cities globally. It is home to around six lakh AI/ML professionals, which makes it the second-largest AI talent hub in the world. 

According to the report, Karnataka is a critical hub for GCCs, hosting more than 40% of India’s GCCs, which are transitioning from outsourcing hubs to co-innovation centres. The state aims to double the number of GCCs by 1,000 by 2029, potentially generating $50 billion in economic output, talent and government support. 

The Karnataka Startup Policy 2022-2027 aims to foster innovation and support startups across the state, including tier 2 and 3 cities. The policy also promotes initiatives like the Elevate Idea2PoC scheme, which offers startups a one-time grant of ₹50 lakh. 

“We have a big announcement in this year’s budget: the LEAP. This program will have a budget of ₹1,000 crore and will establish several centres of excellence, Technology Business Incubators (TBIs), and entrepreneurship development programs, along with facilities that offer plug-and-play options and prototyping resources in regions beyond Bengaluru,” Caur highlighted. 

She said that Karnataka has already shortlisted 11 new TBIs, which we anticipate will be finalised by the end of this month or the beginning of July. These centres have been selected through a rigorous evaluation process, and we believe that expanding our presence outside of Bengaluru will be equally impactful.

Moreover, the state recently announced plans to launch a Beyond Bengaluru Cluster Seed Fund, which will offer exclusive funding support for startups in tier 2 and 3 regions, pending some regulatory approvals, Caur added.

Paris, Delhi, Istanbul, and San Diego also saw their AI-native startups more than double from 2021 to 2024. Similarly, ecosystems like Toronto-Waterloo, Shenzhen, Shanghai, and Mumbai experienced over tenfold increases in AI-related funding between 2022 and 2024, although starting from a low base in some cases.

GSER 2025 underscores AI’s importance as the primary driver of growth in global startup ecosystems, surpassing other sectors in terms of venture capital funding and startup formation. Venture funding in AI also increased 33% from 2023 to 2024, while AI startups received 40% of the global VC funding.

Silicon Valley remains the global leader in new AI startups, followed by New York and London. As per the report, most funding for AI-Native startups is concentrated in Silicon Valley, with over $30 billion invested in 2023 and 2024.

However, other regions are positioning themselves to compete. Beijing, for instance, has become the second-highest recipient of VC for AI startups in the past two years, with nearly $5 billion. While this is much lower than Silicon Valley, it represents a higher percentage relative to Beijing’s ecosystem value and total startup funding, showing its transition to an AI-native ecosystem.

Moreover, the US and Chinese ecosystems dominated over 90% of the global funding, with Silicon Valley alone recording 63% of AI investments. However, the report added that Beijing has outcompeted Silicon Valley in AI intensity, with more venture funding directed towards AI-native startups. This also showcases China’s goal of leveraging AI as a national interest and strength. 

“By investing in AI across the board—from foundational research and skills development to startup acceleration and venture funding—regions can build agile, inclusive, and globally competitive economies. It’s not about replicating Silicon Valley; it’s about crafting a distinctive, purpose-driven approach that leverages local strengths and addresses global challenges,” Elizabeth Scott, chief executive director of Turing Innovation Catalyst Manchester, said. 

The global startup landscape is experiencing a significant shift. As ecosystem value declines and AI accelerates its dominance, traditional approaches are becoming insufficient. 

Moreover, the report highlighted the urgency of entrepreneurial AI policies to ensure the growth and success of local startups without the risk of being left behind. Creating strategies tailored for AI will shape the future of startup ecosystems. It also stressed the need to promptly establish AI-centric infrastructures and policies to seize the forthcoming wave of growth and innovation.  

Entrepreneurial AI policies are crucial as AI has become the main driver of startup growth in 2024, surpassing other sectors. Venture capital investment in AI and big data (AI&BD) startups increased by 33% last year, making it the fastest-growing industry. It also received the largest VC funding, accounting for 40% of all investments, up from 26% in 2021.

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