Since the beginning of this year, five startups offering AI-based social products have received cumulative funding of $27.8 million in seed and Series A rounds, as well as one undisclosed round, according to data from research platform Tracxn. These are the social media platform Plutus, the social media apps Hunch and Explurger, the stock market-focused social media platform OpiGo, and the professional social media platform Medial.
“We are building a model that learns user behavior on our platform and provides tailored suggestions to meet their needs,” said Devansh Mehta, founder of OpiGo. “Our recent feature will act as your personal pocket advisor, using artificial intelligence to provide guidance on everything from finding the best loan rates to tax-saving ideas and investment strategies.”
Investors are betting on the AI phenomenon, and at least two of them, 100X.VC and WEH Ventures, are revamping their social media investing strategies to include AI.
Vatsal Kanakiya, CEO of 100X.VC, said the fund has shifted its funding focus from companies with social graphs to those using AI-driven data or crowd-driven products. A social graph is a network of connections between users that includes likes, shares, comments, and other forms of interaction. Think of Facebook, Instagram and other sites in their genre.
“Our thesis is largely that the social graph is no longer as essential in social products as it was before,” Kanakiya said, adding that the key now is the endless stream of data powered by AI. “Think about the Twitter feed before it became where very few people now actually visit the ‘follow’ tab, the focus is on the ‘for you’ tab which is entirely AI-based, so it doesn’t matter who you follow. Similarly, the main Instagram feed is becoming less intertwined with algorithms.”
100X.VC has a history of investing in social media startups, including professional networking startup Mauka, which closed in 2022, cryptocurrency-based social trading platform Moving, cricket fan social media platform Offside, and anime community platform Quriverse.
Rohit Krishna, general partner at WEH Ventures, is currently interested in generative artificial intelligence or GenAI-based interactions, having already led a $1.6 million seed capital investment round in GenZ-focused social media app Slick last year.
“Consumer interest in social media platforms tends to enhance when a recent form of interaction emerges, from the Facebook wall to Instagram filters to the effortless ability to create miniature videos on TikTok,” Krishna said. “Now, thanks to GenAI, many recent forms of content creation and inventive expression are possible.”
He also believes that platforms could start operating without any social aspect and “become social over time as more and more users start using them.”
Pearl Agarwal, founder and managing director of Eximius Ventures, which has invested in many startups in this space such as anonymous social network Hood and social startup Shuru, stated that artificial intelligence will be a key element in evaluating startups in the social space.
“Artificial intelligence enables seamless generation of high-quality content in various languages. This includes creating multimodal content that seamlessly incorporates images, videos, and GIFs… Moreover, AI plays a key role in content distribution, leveraging generative capabilities to understand unstructured data and effectively reach untapped audience segments. This increases the reach and engagement potential of social startups,” Agarwal said.
“The advent of state AI introduces the possibility of using artificial intelligence that can significantly enhance user retention on social media platforms,” she added. Stateful AI is an AI model that maintains a persistent memory or state throughout a session.
The past few years have seen the rise and fall of many startups in the social networking space. This includes global social media platforms such as BeReal and ClubHouse, which have caused quite a stir in India, and the domestic unicorn Sharechat, which is struggling with mounting losses. ShareChat’s losses increased by 38% to ₹4,064 crore in FY23, according to documents filed with the Registrar of Companies (RoC).
However, investor capital continues to flow. Krishna gives two reasons for this state of affairs. “First of all, it is a typical venture investment with binary outcomes – if the platform is successful, it will make a lot of money. The second reason is that no matter how huge the incumbent is, there is always a share of the market that can be taken away because consumers are always looking for invigorating ways to connect (Snap earns $4.6 billion a year and TikTok US $16 billion, both of which took away Meta market),” Krishna said.
“Social networking is a long-term game and India is a different market because our ARPU (average revenue per user) is much lower,” Kanakiya explained. “Therefore, companies also need to find unique ways to monetize – whether you can go or micro-transactions can be made outside of advertising – there are a lot of problems to solve to build social media in India.”
The hope that a startup from their portfolio will come along at some point keeps these VCs running. Kanakiya noted that eventually there will be someone who will be able to create an India-specific social media network. “So this is definitely a very huge opportunity,” he said.
Krishna added: “We believe that at the cusp of technological change, huge platforms such as mobile images (Instagram), mobile videos (TikTok) and now probably GenAI are emerging.”
