Canadian AI company Cohere raises US$270-million from Inovia, NVIDIA, Oracle and Salesforce Ventures

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Toronto-based artificial intelligence company Cohere has raised US$270-million from investors that include chipmaker Nvidia Corp. NVDA-Q and software giant Oracle Corp. ORCL-N, in another sign of the intense enthusiasm for AI technology.

Inovia Capital in Montreal led the round for Cohere, which provides language models that can be used to power chatbots and search engines, as well as other products and services. Other investors in the round include Salesforce Ventures CRM-N, cybersecurity company SentinelOne S-N, Schroders Capital, Mirae Asset, Thomvest Ventures, and an investment arm affiliated with Deutsche Telekom DTEGY. Index Ventures added to a previous investment in the company. (Thomvest founder Peter Thomson is also co-chairman of Woodbridge Co. Ltd., which owns The Globe and Mail.)

Cohere president Martin Kon said the range of investors is both strategic and a reflection of the interest in the deal. “We were significantly oversubscribed,” he said. “We explicitly did not take a huge cheque from a single company, certainly not a single cloud company, because we want to make sure that we are independent,” rather than being influenced by one large investor.

By contrast, OpenAI, maker of the AI chatbot ChatGPT, has a close relationship with Microsoft Corp. MSFT-Q, which invested US$10-billion in the company earlier this year.

The Globe reported last month that Cohere was in talks to raise money at a US$2-billion valuation. A source familiar with the matter said the latest round values the company between US$2.1-billion and US$2.2-billion. The Globe is not naming the source because they were not authorized to speak publicly about the deal.

AI is a rare bright spot during an otherwise difficult time for Canadian tech startups. Many companies are struggling to raise cash and cutting costs to focus on profitability.

ChatGPT dispelled some of the tech sector’s gloom after its release in November. Its instant popularity caught investors and tech companies off guard, including Google parent company Alphabet Inc.

Google GOOGL-Q, which had been developing language-generating technology for years, quickly started integrating AI tools into its own products and services. Proponents of generative AI, a term for programs that can create and interpret text and other media, argue the technology can reduce costs and increase productivity across industries.

While some have cautioned that AI is caught in a hype cycle, many investors are nevertheless buying in. Nvidia, which supplies chips for data centres used to train and power AI systems, has seen its shares soar about 170 per cent this year. Its current market cap is just shy of $1-trillion.

Cohere, which has raised at least $165-million in two previous rounds, was founded in 2019 by Aidan Gomez, Nick Frosst and Ivan Zhang. Mr. Gomez, Cohere’s chief executive, is a co-author of a 2017 research paper that outlined a new method for computers to produce and interpret language. The technique is now standard in generative applications.

Today, Cohere’s language models are used by Spotify SPOT-N, legal tech company Casetext and U.S. customer service provider LivePerson. Cohere is also looking beyond English-language users. It has released a model trained on more than 100 languages.

Inovia partner and chief technology officer Steve Woods was working at Google when he crossed paths with Mr. Gomez and Mr. Frosst, and has been talking to Cohere for at least a year about investing. Part of the attraction, he said, is the high barrier to building a company such as Cohere. “All you need is a time machine, a billion dollars, a hundred of the best researchers in the world, and access to a lot of specialized compute resources,” Mr. Woods said.

Still, Cohere faces competition beyond OpenAI. Mr. Woods said the company’s focus on working closely with enterprise customers gives it an advantage. “We want to invest in a company that drives value as a primary mechanism to enterprises, and is focused on the areas of need for that: privacy, security, speed and cost effectiveness,” he said. “This has been the motivation of Cohere from the beginning.”

Concerns about the effects of AI are rising alongside its popularity. The European Union is developing a law to govern applications of AI, Canada has a bill under way, and, in the U.S., the White House has released what it calls an AI Bill of Rights, which includes guidelines for safe development and use. OpenAI CEO Sam Altman is on a world tour, meeting with customers, developers and politicians as worries mount about the potential for AI to replace jobs, spread misinformation – and worse.

Around 350 AI researchers and executives recently endorsed a 22-word statement arguing that mitigating the “risk of extinction” from AI should be a global priority, alongside preventing nuclear war. Geoffrey Hinton, an early investor in Cohere, was among the signatories.

Mr. Gomez wrote an op-ed earlier this week to counter the gloomy narrative. “We must invest in the responsible development of AI and reject doomerism and calls for halts to progress,” he wrote, pointing to the potential for AI to improve health care and provide economic benefits. “Delaying the development of this technology will mean millions of excess deaths, a major stall to relative national productivity and economic growth, and the ceding of economic opportunity to the nations that do enable the technology’s advance.”