Synopsis
Air-conditioners are becoming an essential purchase in India, attracting startups like Helium and Optimist into a market long dominated by large brands. New entrants are developing affordable, energy-efficient products for urban living, while government incentives for local manufacturing are lowering barriers in a market long dominated by large players.Listen to this article in summarized format
Urban Ladder cofounder Ashish Goel’s new startup, Optimist, which is developing ACs for Indian conditions, recently raised $12 million in a round led by Accel and Arkam Ventures. Helium Smart Air, founded in 2025, has raised $2 million from India Quotient.
With the government providing incentives for local manufacturing, which lowers the entry barriers, startups are increasingly eyeing a piece of this growing market that has been long dominated by large companies.
“The market is large and clearly attractive. But the entry barriers are high, which is why it hasn’t been easy for new players to come in,” said Goel. “The supply chain is complex, and even getting customers excited about what we are doing is not easy.”
To fight the incumbents, these startups say they are building products that are affordable, energy efficient and designed for the realities of urban living, instead of competing purely on distribution or pricing.
The interest in the category is not limited to new firms. Consumer appliances maker Atomberg Technologies is also looking at the ACs and refrigerators segment. Its current focus though is limited to building parts like motors for indoor and outdoor units, and controllers.
“The AC segment, specifically, has been growing at a very high pace over the last few years. Penetration in India is still very low, and replacement demand is starting to kick in,” said Atomberg cofounder Sibabrata Das.
Services platform Urban Company is exploring entry into the AC market through its ‘Native’ line, extending its presence from appliance servicing into owned hardware, ET reported last October.
India’s AC market, which was estimated to be $6.15 billion in 2025, is projected to reach $21.59 billion by 2034, expanding at a compound annual growth rate of 14.98%, according to market research firm IMARC.
Government incentives
“The government’s push is clearly towards higher energy efficiency and deeper localisation. Star-rating norms are tightening every few years, raising the bar for performance, while PLI (production-linked incentives) and the Atmanirbhar push are steadily moving assembly and components to India," said Ashish Sharma, cofounder of Helium Smart Air.
Addressing the gaps in the domestic AC manufacturing capacities, the government temporarily exempted key AC and refrigerator components from mandatory BIS certification to prevent shortages during peak summer demand in March 2025.
“The cooling market is growing substantially. Since AC penetration is still low, the fan remains the primary cooling product for the majority of Indian homes. Startups are entering this space to solve problems regarding design, compact spaces, and efficiency—things that weren't being addressed 15 years ago,” said Atomberg’s Das.
The trend extends beyond ACs. Companies such as Karban, Nuuk, EDT and Superfan are entering categories like air fryers, mixers and other home appliances that were once seen as stable and difficult to disrupt
Their approach mirrors what startups have done in sectors like electric mobility by re-engineering products for current use cases, layering in technology, and building direct relationships with consumers.
Differentiated offering
These startups are building end-to-end products and betting on changing the overall user experience by first tackling the pricing.
Helium is entering the market with products built to cool spaces up to 100 sq ft and with a device that can run on a 1.5 kW on grid solar installation as well.
These ACs are designed for smaller spaces, integrated with app-based controls, and built with energy optimisation as a core feature. These brands also offer users an app to get electricity bill estimates, gas-level indicators, filter health tracker and more.
“We are looking at a new generation product at the intersection of physics, economics and product design,” said Bala Srinivasa, managing director at Arkam Ventures that has backed Optimist. “Affordability is going to drive market expansion, but to achieve that affordability, you need to rethink from first principles on how to make a more efficient, yet cheaper, air-conditioner. That is the engineering and business model challenge.”
In a category where underlying technology can be replicated, differentiation is shifting toward brand, reliability and customer trust, according to experts.
“In a market like air-conditioners, you can’t build a differentiated product without deep engineering effort. That’s why the bulk 65% of our team is focused on Rundefined this is fundamentally a technology and performance problem,” said Optimist’s Goel.
