General Catalyst’s Hemant Taneja on $5 billion India bet and its shift beyond venture capital to company creation in the AI age

Silicon Valley venture capital firm General Catalyst will deploy $5 billion in India across artificial intelligence, defence, healthcare, industrials and fintech, marking one of its largest commitments to the country. The firm is accelerating its shift from traditional venture investing to a broader platform and company-creation model, amid a reset in the early-stage investment landscape.

In an exclusive interaction with ET, chief executive Hemant Taneja and Neeraj Arora, CEO for India and MENA (Middle East and North Africa), outlined how the firm plans to combine early-stage investing with growth bets and roll-up strategies, deepen collaboration with Indian conglomerates and policymakers, and back applied AI as the defining opportunity for India’s next wave of entrepreneurship. Edited excerpts:

How will the $5 billion be deployed and across what time frame? Will this be traditional early-stage investing or growth bets?

Taneja: It’s going to go towards major sectors, AI, defence, healthcare, industrials, areas where the Indian economy and markets are creating opportunities to build global market leaders.

We’re going to get more aggressive. In terms of investment strategy, we’re obviously doing early-stage investing but we also have a strategy around creation, where we put companies together.

We’ll mimic our global platform, focus on the early stage, as we do across Europe, the US and India, but support companies all the way through growth. Some bets we’ll take at the later stage as well.

This is similar to your global positioning..

Arora: We have a creation vehicle in the US that has been doing roll-ups, including AI roll-up strategies. It will not be a clone of that. It will be specific to what India needs.

We’re working on one idea right now in manufacturing, which we’ll talk about in a couple of months.

We’re also doing resilience-related investments, defence, where we’ve already have a couple of large deals; healthcare, where we have a large portfolio; fintech, which remains very important for us globally.

We’re starting to see collaboration across geographies. A defence company in India can work with the rest of our portfolio globally. Healthcare companies here can plug into our network in the US and Europe. That becomes a huge differentiator. It’s all coming together within the GC platform, but adapted for India.”

Also Read: AI is helping organisations scale faster, resulting in sharp valuation gains: General Catalyst CEO Hemant Taneja

Why shift towards a platform play now, is it because of the challenges in the traditional venture capital model, you have said it’s a period of ambiguity for the investing world?

Taneja: It goes back to resilience. Every region has to figure out how to build resilience in key industries — defence, industrials, energy. You want local supply and local capability.

With AI, the big opportunity is transformation. Transformation is about taking AI capabilities and creating ecosystems of companies that can transform industries. That is beyond venture — much bigger than typical venture capital.

We partner with ambitious founders building category-defining companies. But then the question is: what do you do with them?

For us, it’s about working with those companies to transform industries in different regions. That’s why we have creation because you need to collaborate with industry and build platforms that wouldn’t exist naturally.

Venture capital by itself is not enough. You need a platform mindset if you’re truly going to transform industries in a world where every region wants resilience and AI is diffusing into those industries.

Also Read: Discord, Snap investor Niko Bonatsos departs General Catalyst, plans new VC firm

Does this mean deeper collaboration with large Indian groups?

Taneja: If you want impact at scale, the conglomerates in India are very entrepreneurial. They’re willing to take on new opportunities aggressively. Their scale married with the innovation of the young companies we back is a powerful combination. We’re very keen on partnering with them.

Arora: We are building a framework not ready to talk about in detail yet but we’re working on bringing all stakeholders together— large companies, our portfolio companies and the government.

The idea is to make sure India is ahead of the curve in AI diffusion. That work is underway. We’ll talk about the formal structure when it’s ready.

ETtech Neeraj Arora, managing director and India CEO, General Catalyst

Is this framework specific to India? How is the dialogue with the government evolving?

Arora: We’ve done something similar in Europe, though structured differently. The idea is to catalyse innovation and adoption ecosystems. You want innovative companies in our portfolio partnering with industry to accelerate transformative models. We do the same in the US in healthcare, partnering with large health systems.

Small companies cannot transform industries on their own. They need to team up with incumbents.

The government is figuring out India’s strategy across the AI stack, models, compute and applications. We’re talking to them about all of it.

That includes our global portfolio, like Anthropic — how they set up in India, as well as our local investments and our work through the General Catalyst Institute on AI governance.

India has a part to play across all three layers.

Also Read: General Catalyst to ramp up investments in manufacturing, AI

AI requires billions in capital. Where can India realistically compete?

Taneja: If you look at the stack, digital infrastructure, models and applications.

On digital infrastructure, India needs to make significant investments. If work that used to be done by labour turns into AI workloads and those workloads are owned by non-Indian companies, you lose productivity gains onshore. That affects Indian prosperity.

On the model layer, the world is shaping up with frontier labs in the US and open source largely from China. India has to invest in the model layer because otherwise you’re dependent on either American technology or Chinese open source, which creates strategic risk.

But you don’t need the biggest models for everything. You can build efficient smaller models serving Indian languages and edge devices. That doesn’t require billions of dollars.

On the application layer, India has great engineering talent. The ability to adopt and apply models locally — and build global leaders — is where India is very well positioned.

Digital infrastructure is capital-intensive. Applied AI doesn’t need that level of capital because software does much of the work. What used to take a thousand engineers can now be done by ten. That layer is about unleashing entrepreneurship.

Also Read: General Catalyst to ramp up investments in manufacturing, AI

Which layer will General Catalyst double down on?

Taneja: Our big interest is in the applied AI layer. That applies across industries, manufacturing, supply chain and others.

Cloud infrastructure is really infrastructure finance. That’s not traditional venture. But we would look at semiconductors.

We’re open-minded. We would look at starting a company, investing in an early-stage company or buying a business. But we wouldn’t buy a company just to cut costs and sell it. It has to generate venture-type outcomes by transforming it.

What happens to SaaS in an AI-native world, we have seen how the sector has been pummelled of late..

Taneja: SaaS companies are embedding AI into their products. That’s very different from building something from scratch designed for AI. Some companies will make that transition well. Many will struggle.

Will SaaS companies enjoy the aggressive multiples they had in the past? It’s hard to see that happening. AI is deflationary. Infrastructure software is a very hard place to invest right now because models are going to absorb a lot of that value.

The applied layer, companies that help enterprises rethink operations and workflows with AI — that’s vibrant. We think that’s the replacement for traditional SaaS.”

Where does India fit in this transition?

Taneja: India has an enormous IT services industry with deep enterprise relationships. If those companies transition from labour arbitrage to AI-led transformation companies, there’s a huge opportunity. But they have to transform themselves first. The ones that make that shift appropriately will become much more valuable.”

What are the job implications?

Taneja: You will see displacement of jobs. That’s reality. India has a young demographic and wants to create jobs. AI is deflationary. That creates a massive reskilling challenge.

In the short term, we may need more people to drive AI-led transformation. In the medium term, we need to think about new kinds of jobs.

AI can do basic tasks more effectively. The question is how we move human ingenuity to higher-order work. It will create dislocation. It will be hard to fight. It’s better to lean into it and shape the transition while reskilling along the way.”

Beyond ChatGPT, there hasn’t been a breakout consumer AI app. When does that change?

Taneja: There’s experimentation, AI therapists, AI companions, healthcare use cases but nothing at scale yet.

The same thing happened with the internet. The money was in infrastructure first. Consumer applications came later. The shift toward consumer spend will happen. AI makes offerings cheaper and more convenient. But it requires deeper integration with the physical world — travel, logistics, infrastructure. We’re just early in that cycle. The last big consumer wave was Uber and Airbnb. We’ll see another one.

Source: EconomicTimes
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