Cohere, an artificial intelligence startup pioneering foundation models to rival the creator of ChatGPT, OpenAI, is currently in advanced negotiations to secure $500 million in funding, aiming for a valuation of approximately $5 billion. This information comes from a source familiar with the matter.
According to the undisclosed source, the Toronto-based company has witnessed a substantial increase in its annualized revenue run rate, soaring from $13 million in December to $22 million this month, following the launch of its new model, Command-R.
Founded by former Google researchers, Cohere has strategically positioned itself by focusing on enterprise-centric AI models. The company, which currently boasts a partnership with Oracle, also intends to extend the availability of its models across other major cloud service providers.
Cohere previously attained a valuation of $2.2 billion in June, securing $270 million in funding from investors such as Inovia Capital, Nvidia, and Oracle. This new valuation ambition, however, had not been disclosed prior to this revelation.
Reports from January indicated Cohere’s intention to raise between $500 million to $1 billion, and it is anticipated that existing investors will participate in this latest funding round, as per the source.
This potential funding round underscores investors’ willingness to back AI startups at substantial valuations, despite moderate revenue figures, underpinned by the belief in the future proliferation of AI models.
Companies specializing in foundation models are aggressively seeking capital to fuel the costly development of AI models, which demand significant computational resources and top-tier talent.
Cohere is vying with industry giants like OpenAI and Anthropic, with a focus on AI’s application within business contexts.
OpenAI, for instance, has forecasted $1 billion in revenue for 2024 and has garnered over $10 billion in investments, including from tech titan Microsoft. Similarly, other AI labs like Anthropic and Mistral have attracted substantial backing from major tech corporations.
However, the fervor surrounding the funding of AI labs operating at a loss has raised concerns among certain venture capital investors, who question whether these foundation models will eventually generate sufficient revenue proportional to the substantial investment required for their development.
The disclosure of Cohere’s December revenue run rate was initially reported by The Information on Wednesday.
