AI startup Cohere in talks to raise funding at $6B plus valuation

Cohere, an AI foundation model company that competes with Microsoft-backed OpenAI, is in talks to raise hundreds of millions of dollars in a funding round that could value the startup at more than $6 billion, sources told Reuters, in the latest sign of the investment frenzy around generative AI.

Toronto-based Cohere, established by former researchers at Alphabet in 2019, has quickly risen through the AI startup ranks given their intensive research background and close ties to Google, investors said.

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 is planning on introducing a new dialogue model that would resemble ChatGPT to let enterprise users generate text and engage with the model to refine the output. Unlike ChatGPT, Cohere's technology will mainly be accessible to developers and businesses, CEO Aidan Gomez told Reuters in an interview.

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"Our chat models are focused more on business applicable tasks like answering questions than writing poems. We don’t plan to hand them over to everyone to use for free without limit," said Gomez. "We want to build a healthy and sustainable business."

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Gomez declined to comment on the funding status of the company.

It was not immediately clear how much Cohere was seeking to raise in the current round. Sources requested anonymity for discussing private funding matters.

Cohere has raised $170 million to date from funds including Index Ventures, Tiger Global and AI luminaries Geoffrey Hinton, Fei-Fei Li and Pieter Abbeel.

Focus on NLP

Focusing on training natural language processing (NLP) models, Cohere competes with a group of foundation model providers such as OpenAI and Anthropic.

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Gomez said the company differentiates itself by focusing on serving enterprise users, and Cohere has been talking to companies from marketing, consulting and tech to help them incorporate generative AI.

Cohere announced a cloud partnership with Alphabet to access its TPU computing power last year. Its language AI also becomes available on Amazon’s fully managed machine learning service SageMaker in January.

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Last month, Cohere hired Martin Kon, the former chief finance executive at YouTube, to lead its product and market strategy. Cohere is powering some consumer applications including Hyperwrite, which helps people write faster and generate articles using AI.

"We expect this year to be a breakout year for us to bring in enterprise customers," said Gomez.

Gomez said Cohere will focus on text generation models, unlike its peer OpenAI which has released GPT-3 model for text as well as DALL-E for image generation.

Since the launch of ChatGPT in November, the technology that can generate prose, imagery or computer code on command has attracted investors' attention. Other foundation model providers such as Anthropic is also in talks to raise funding at multi-billion valuations, investor sources said.

With Microsoft Corp's $10 billion investment in OpenAI, other big tech companies, including Alphabet and Oracle, are also looking at investing in AI startups, sources said.

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Gomez said Cohere will not take strategic investments that require exclusive rights.

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"It's important for us to stay independent and work with different cloud providers," said Gomez.