There are three ways to fund an ambitious project like a foundational AI model:

  1. Free Cash Flow from an Existing Business: Xerox PARC was a hub of innovation in the 1970s, pioneering cutting-edge technologies (though it did not commercialise them). Many companies, including Apple, took inspiration (stole) from PARC. It attracted some of the brightest minds in computer science, actively recruiting from top universities. Today, DeepSeek has emerged from a quantitative hedge fund, leveraging its financial resources to develop AI models. Some speculate that DeepSeek is backed by the Chinese government, but assuming it has sufficient GPU resources and follows the past research from OpenAI’s, its progress is plausible. While Google, Microsoft, and others are investing heavily in AI (e.g., Gemini and Phi), India lacks trillion-dollar companies capable of independently funding foundational AI research, ruling out this option. 

  2. Venture Capital (VC) funding: Venture capital works well in the US, where investors take higher risks and operate under a portfolio strategy, rarely investing more than 10% of their fund in a single company. Large-scale AI projects require mega funds to co-invest—OpenAI and Anthropic are prime examples.

Since Indian VCs are more risk-averse, they tend to invest in startups that have a path to a liquidity event, chances to raise follow-on capital from bigger US funds (as well as sovereign funds). US funds and sovereign funds won’t invest in Indian foundational models because they can easily deploy in market leaders like OpenAI and Anthropic. They have global TAM, lead in usage, and have the willingness and ability to build better frontier models. This is why Sarvam is the only model that has a chance because they have come up with their own model. They have one co-founder who was the Chief Project Manager of Aadhaar and another who was teaching GPU programming at IIT Madras in 2018. They are probably the only ones who have a chance to make it as a VC-backed Indian foundational AI company. Even then, when I meet VCs, a lot of them question if their TAM is big enough (Indic languages focus vs English where global players can win). I would bet they will be the ones working with Government of India, like Anduril and OpenAI in the US. Krutrim, I will ignore. You can’t compete with OpenAI and Deepseek when it is not your major focus.

  1. Government sponsorship and funding: This is where it gets interesting. Look at the success of ISRO as an organisation. Consider major projects like UPI and Aadhaar. When the government commits to an initiative and provides adequate funding, large-scale projects can succeed. The question is: will they do it? I believe they will. Modi’s government needs a major success in its third term. After two decades of patriotic sentiment, people are now questioning: why are we so far behind the US and China in every domain? The US was always ahead, and when Sam Altman dismissed India’s AI capabilities, people acknowledged that we haven’t historically produced frontier AI talent—India has primarily been a service-based economy. But now that China has demonstrated the ability to build next-generation AI models using past frontier research, the question is no longer if but when India will develop its own competitive AI model. Donald Trump remains unpredictable. It’s unclear what AI-related regulations he might introduce. India has had access to top AI models so far, but with growing fear-mongering about China allegedly stealing US technology and rapidly closing the gap, we cannot predict how US policy might shift.

What will it take for us to get there?

  • Government funding. Invest as much as we do in ISRO—around $1-2 billion per year. Instead of another welfare scheme or monument, allocate this budget to AI development.
  • A world-class research center. Create a “Xerox PARC”-style AI hub to attract India’s brightest talent. 
  • Talent. Encourage AI researchers from Silicon Valley to return home by tapping into national pride. Position this as India’s most crucial technological mission, build momentum. ISRO has already shown that with the right support, India can compete in cutting-edge technology. ISRO researchers likely earn far less than OpenAI engineers, yet they work with deep passion and national pride.
  • Aspirational positioning. Everyone in college should aspire to be part of this organisation than becoming an IAS officer or going to the US for their MS.
  • Strong leadership. Just as Bob Taylor led Xerox PARC (read Accidental Empires for more on this) and Nandan Nilekani spearheaded Aadhaar, we need a visionary leader to drive India’s AI revolution.

It will take time, but we have to start somewhere.

Someone asked the following question on Twitter: “This is probably ignorant since I dont really understand the working on the indian chaebol but is there a reason Adani/Ambani/Tata/Infosys couldnt foot half the bill - with the gov doing the other half - to train a frontier model?”

My response to that was: “Good point. A joint project between one of these companies and the Indian Government can happen because they are close to the government and the Government wants to work together on this. However, for most service companies, it makes more sense to improve existing free AI models and use them for their clients. Making products has never been their strength. If they were good at making products, they would have already built products to compete worldwide using their extra money. Risk taking is also limited in these service companies.”