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The Public Sector Pension Investment Board is in talks to co-lead an investment in Toronto-based Cohere Inc. that would value the artificial intelligence company at US$5-billion, according to a report by tech media website The Information.

Cohere develops large language models that power chatbots and other applications, and was last valued at US$2.2-billion in June, 2023, when it raised US$270-million from Montreal’s iNovia Capital, Nvidia Corp. and Oracle Corp.

The company’s revenue has been minimal, to date. The Information reported Cohere, which is seeking to raise at least US$500-million, is bringing in only US$1.8-million per month. The potential funding from the pension manager would value Cohere at more than 200 times revenue. AI startups had substantially higher valuations than non-AI companies raising money in 2023, according to CB Insights.

Cohere is projecting US$300-million in annualized revenue by the end of the year, Reuters has previously reported.

Cohere and PSP Investments declined to comment.

PSP Investments has backed several Canadian venture capital firms, including Radical Ventures, an early Cohere funder. An investment in Cohere would represent PSP Investments’s second large-scale direct bet on an emerging tech company in Canada. The first has not fared well.

PSP Investments has sunk more than US$120-million in equity and committed another US$50-million in loans, of which US$30-million has been drawn, into Burnaby, B.C.-based D-Wave Quantum Inc., creator of the first commercially available quantum computer.

The quantum industry is in its early stages and many companies such as IBM and Google Inc. are developing quantum computers that, if successful, would provide fuller functionality than D-Wave’s machines.

D-Wave has repeatedly failed to meet its revenue forecasts since going public in 2022. It recently announced steps to boost revenue, underscoring the challenges of translating breakthrough science into a commercially viable business.

The company announced on Thursday it earned US$8.8-million in revenue in 2023, up 22.1 per cent compared to the previous year. That’s well below the company’s own projected range issued last fall of US$10-million to US$11.5-million, which itself was reduced from an earlier forecast.

D-Wave’s net loss of US$82.7-million for the year dwarfed its revenues. The company had US$41.3-million in cash, US$20-million in remaining capacity under its PSP loan and US$82.1-million in available financing through an equity line of credit as of Dec. 31.

As for Cohere, the company is differentiating itself from OpenAI and others by eschewing consumer-facing and general-purpose applications such as chatbots and image generators to focus more narrowly on enterprise users. Customers include writing assistant HyperWrite and customer service platform LivePerson.

Cohere is also betting that its expertise in retrieval-augmented generation – which can extract information from a company’s propriety documents – will give it an advantage. Generative AI applications are not entirely reliable and prone to making up information. Cohere has said the process can reduce inaccuracies, allowing businesses to deploy AI with more confidence.

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