Rajan Anandan, not Sam Altman, holds the answer to his question

Sam Altman was asked a ChatGPT question by Rajan Anandan at an event in India.

The kerfuffle around OpenAI CEO Sam Altman’s unusually honest exchange with former Google CEO and angel investor Rajan Anandan is being framed as a challenge to Indian capabilities with apologists up in arms against the imagined insult. Tech Mahindra CEO CP Gurnani was among the first to react, declaring “CHALLENGE ACCEPTED”, while ignoring his own company’s rather modest record of innovation so far.

That aside there is also the small matter of Altman being asked to pass judgment on an issue about which the questioner can be expected to be better informed. For the record, Anandan is managing director of PeakXV Partners, formerly known as Sequoia Capital India, where he guides Surge, the firm’s rapid scale up program focused on early stage startups in India and Southeast Asia. He is also an angel investor in dozens of startups, mostly in mobile technology, internet, and software, including Instamojo, Unacademy and Dunzo.

So, while the first part of his question — “are there spaces where you see a startup from India building foundational (AI) models” — was legitimate, the add-on part — "Where is it that a team from India, with three super-smart engineers having not 100, but $10 million each could actually build something truly substantial?" — was rhetorical.

Altman is a terrific investor having headed YCombinator and then put his own money in companies like Stripe, Reddit, Pinterest and Airbnb. His angel investing skills won him the title of Forbes magazine’s Top Investor under 30 in 2015. But as an entrepreneur, he has had mixed success. Loopt, a location-based social mapping service which allowed people to use location to discover the world around them, that he co-founded in 2005, ended up as a failure after its daily active users dropped to a few hundred. Eventually, its once impressive $500 million market cap fell to a tenth of that.

Sure, Altman’s OpenAI is now the hottest new thing in tech and is valued at over $30 billion thanks to its AI technology-driven natural language processing tool ChatGPT which allows users to have human-like conversations. But ChatGPT isn’t a garage product developed by a Stanford drop out (which Altman is) working on his own with little funding and support. OpenAI was founded in 2015 by a bunch of influential people including Elon Musk, Greg Brockman, formerly the CTO of another leading Silicon Valley startup Stripe and Ilya Sutskever, a research scientist at Google Brain and co-inventor of AlexNet. OpenAI also raised over a billion dollars from the likes of Microsoft, Khosla Ventures and Reid Hoffman Foundation within three years of starting out.

In other words, OpenAI doesn’t even remotely resemble the team with a few super-smart engineers having $10 million that Anandan spoke about. Post Microsoft’s $10 billion infusion in the company it is now the quintessential Silicon Valley success story replete with outsized ambitions, huge development costs and the risks thereof and, of course, the sheer scale of the potential rewards at the end.

India’s startup ecosystem, for all its impressive numbers, doesn’t share the most critical element of this matrix — the appetite for giant risk. Between 2013 and 2022, AI startups in India received total funding of $7.73 billion with nearly 40 per cent of that coming last year by which time the hype around Generative AI was so strong that VCs would have funded a scrap maker named Artificial Intelligence. For the most part, finding funds for deep tech in India is still a big challenge. Ask any of the startups from the various incubation labs.

In their 2019 book Bubbles and Crashes: The Boom and Bust of Technological Innovation, Brent Goldfarb and David Kirsch, professors of entrepreneurship and strategy at the University of Maryland's Robert H Smith School of Business, write about how the early narratives that emerge around new technologies are almost always wrong. OpenAI remains a promising new development but its commercial success is far from proven. Yet, it is able to attract billions of dollars in funding.

It is this risk-reward equation that Altman who's currently on a globe-trotting mission that's already taken him to South Korea, Israel, Jordan, Qatar, and the United Arab Emirates besides India, was probably referring to. Until that culture percolates into the Indian startup ecosystem, breakthrough ideas will continue to remain underfunded.