FILE PHOTO: AI Artificial Intelligence words are seen in this illustration taken, May 4, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
(Reuters) -Cohere, an AI foundation model company that competes with Microsoft-backed OpenAI, said on Thursday it had raised $270 million in a funding round from investors including Nvidia, Oracle and Salesforce Ventures.
The announcement confirmed the long-rumored funding for the Toronto-based AI startup, which focuses on building AI models for enterprise customers. Cohere didn't disclose its valuation, but people familiar with the matter said it is valued at $2.2 billion.
Foundation models are AI systems that are trained on large sets of data, with the ability to learn from new data to perform a variety of tasks. Generative AI aims to make human-like creations through computer code that has processed vast amounts of data.
Cohere, led by former top AI researchers at Alphabet's Google, has been positioning itself to be a neutral provider for enterprises to use models that are not tied to cloud providers like Microsoft.
"We're independent. We did not and we would not take a huge check from a single company, especially not a huge check from a single cloud provider, because we think that would constrain us from doing the right things for our business and our enterprise customers," Martin Kon, president at Cohere, said in an interview.
Cohere will use the fresh funding for purchasing computing resources and hiring, Kon said.
Since the launch of ChatGPT in November, the technology that can generate prose, imagery or computer code on command has attracted investor attention. AI startups have become a bright spot in an otherwise subdued market for venture capital funding, amid rising interest rates and increased investor focus on profitability.
Cohere's funding was led by Canada's Inovia Capital and joined by other investors such as DTCP, Mirae Asset, Schroders Capital, SentinelOne and Thomvest Ventures.
Reuters reported earlier this year that Cohere was seeking to raise hundreds of millions in a round that could value the startup at $6 billion. Kon declined to comment.
Foundation model startups have been in an arms race to raise capital to fund the development of large language models that require intensive computing power and top engineer talents.
Some have received backing from big tech companies and fetched sky-high valuations despite limited revenue, as investors are betting on potential growth. OpenAI was valued at about $29 billion in Microsoft's investment, and Anthropic, another AI startup, was valued at nearly $5 billion in a round Google participated. Salesforce Venture backed both Cohere and Anthropic.
"If you look at other AI companies in the foundation LLM spaces, everyone's valuation is crazy," said Umesh Padval, venture partner at Thomvest, referring to large language models (LLM).
"This was actually the most affordable if you compare the revenue to the valuation, one of the best bargains in a very highly priced market."
(Reporting by Krystal Hu in San Francisco and Manya Saini in Bengaluru; Editing by Shounak Dasgupta and Lisa Shumaker)
