An artificial intelligence (AI) startup targeting the Indian market has raised $41m, marking it the largest early-stage funding round of an Indian AI startup.

The larger than usual investment comes as the value of AI and generative AI (GenAI) venture capital deals in the country slowed down in 2023.

Five-month-old Sarvam AI is looking to developing custom-made large language models (LLMs) that support the Indian language, which will help Indian businesses create custom apps at an affordable price point. 

The Series A funding round was led by Lightspeed Venture Partners and included participation from Khosla Ventures and Peak XV Partners. 

Sarvam AI co-founders, Vivek Raghavan and Pratyush Kumar, previously worked on developing AI models for speech recognition and translation at AI4Bharal.

LLMs, like OpenAI’s GPT-4 and Meta’s Llama, are extremely powerful AI systems that use masses of data to translate, summarise, edit and create text, audio and video. 

Since OpenAI’s ChatGPT GenAI chatbot was released in November 2022, powered by GPT-4, tech giants and startups have been racing to create their own models that can power custom AI applications. 

The LLM and GenAI race has led to millions of dollars of investment across the industry. This is partly due to how expensive LLMs are to produce and run. It is rumored that OpenAI spent at least $100m to create GPT-4.

“Finding the best enterprise use cases to monetise the technology [GenAI] is a priority in the industry,” said Beatrice Valle, senior analyst at research company GlobalData.

Sarvam AI’s funding comes during a year of declining investment in Indian AI companies, according to GlobalData’s deal database.

Capital raising deals include venture financing, equity offerings, private equity and debt offerings.

In 2023 so far, AI capital raising deals in India totalled $733m, a significant drop from 2022 which saw $2.6bn in investment.

In 2021, the value of capital raising deals in the Indian AI industry peaked with a total of $2.8bn for the year.