Cohere, an artificial-intelligence startup that develops foundation models to compete with ChatGPT creator OpenAI, is in advanced talks to raise US$500-million at a valuation of about US$5-billion, according to two sources familiar with the matter.
The Toronto-based company has seen its annualized revenue run rate grow to US$22-million this month from US$13-million in December as it launched new model Command-R, the source, who requested anonymity to discuss confidential matters, told Reuters.
A separate source familiar with the matter confirmed Cohere’s fundraising and valuation goals as well as the company’s revenue projections in an interview with The Globe and Mail. The source said Cohere projects its annualized revenues could soar to above US$300-million by the end of this year. The Globe is not identifying its source because they are not authorized to discuss the matter.
The Information first reported Cohere’s December revenue run rate and projections for this year on Wednesday. Reuters in January reported Cohere was looking to raise about $500-million to $1-billion.
The startup founded by former Google Inc. researchers has pitched its growth potential to investors by building enterprise-focused AI models. Cohere, which currently has a partnership with Oracle, also plans to make its models available on other major cloud providers.
Cohere develops large languages models, the AI technology that underlies chatbots such as ChatGPT, and competes with companies such as OpenAI and Anthropic. The company, which was founded in 2019, has differentiated itself with a focus on enterprise customers. In particular, Cohere is marketing a technique called retrieval augmented generation, which the company says reduces hallucinations and mistakes when LLMs output text.
Cohere was valued at US$2.2-billion last June when it raised $270-million from investors including Inovia Capital, Nvidia and Oracle. The new valuation it is seeking had not been reported previously.
Existing investors are likely to join the latest funding round, the Reuters source added.
If successful, it could be the latest sign of investors’ appetite for funding AI startups at high valuations despite moderate revenue numbers, as they bet on the future adoption of AI models.
Foundation model companies have been racing to raise capital to fund the expensive development of AI models that require huge amount of computing power and top industry talent.
OpenAI has projected US$1-billion of revenue in 2024, and raised more than US$10-billion from investors including Microsoft. Other AI labs, such as Anthropic and Mistral, have also attracted backing from big tech companies.
The frenzy to fund loss-making AI labs has raised eyebrows among some venture capital investors who question if the foundation models will ever make enough revenue relative to the huge amount of capital needed to develop them.
- With files from The Globe’s Sean Silcoff and Joe Castaldo