xAI cofounder Igor Babuschkin is in talks to raise up to $1 billion in initial financing for a new AI research startup called River AI, multiple sources familiar with the deal told Forbes. The startup aims to raise funding at a valuation of up to $5 billion, multiple sources said.
VC firm General Catalyst is in talks to lead the round, two of the sources added, noting the round is still ongoing and the deal size could change. Babuschkin is also putting up to $100 million of his own money into the company, these people said.
Babuschkin and General Catalyst did not respond to Forbes’ request for comment.
While it’s unclear exactly what River AI is planning to work on, it’s part of a growing wave of so-called “neolabs”— startups founded by notable AI researchers that have raised massive sums of capital to carry out cutting-edge, long term artificial intelligence research rather than focus immediately on developing and selling products. “It was just like an idea on a napkin,” one investor who was familiar with the deal told Forbes. The company was incorporated in Nevada on April 20, 2026, according to documents reviewed by Forbes.
A number of other neolabs have raised significant funding over the past year. Natural language processing pioneer Richard Socher’s Recursive Intelligence raised $650 million at a $4.65 billion valuation to build models that can improve themselves without human intervention, and DeepMind heavyweight David Silver’s Ineffable Intelligence picked up $1.1 billion to chase an even more radical moonshot: AI that doesn’t need human training data at all and instead learns through trial and error.
In August 2025, Babuschkin became the biggest name yet to walk out of xAI’s increasingly crowded exit door, leaving the startup he cofounded with Elon Musk in 2023. His departure landed as part of a broader exodus from the company’s founding and technical ranks, but it carried particular weight: Babuschkin had been one of xAI’s core builders, helping develop the training infrastructure behind its models and playing a key role in the Memphis supercluster, the massive compute project that is now being leased out to rival Anthropic to run its blockbuster chatbot Claude.
In February 2026, SpaceX acquired xAI for $250 billion. Since then, all of its 11 cofounders have left the company and in May, Musk said xAI will be dissolved as an independent company and rebranded as “SpaceXAI,” with the space company selling its AI products directly.
Before starting xAI, Babuschkin spent more than four years at Google DeepMind as a senior research engineer where he worked on AlphaStar, an AI software programmed to play (and beat humans at) strategy game StarCraft II. He then moved on to OpenAI as technical staff member but left before ChatGPT was launched.
Three days before xAI was incorporated in 2023, Babuschkin was arrested for domestic violence, according to The Information. He was not charged.
Iain Martin contributed reporting to this story.
