Report: OpenAI rival Cohere could raise up to $1B in fresh funding

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Cohere Inc., a large language model startup, is holding talks with investors to raise between $500 million and $1 billion in fresh funding.

The Financial Times reported the discussions today, citing people familiar with the matter. The investment is expected to give Cohere a “significantly higher” valuation than the $2.2 billion it was worth after its most recent funding round. That round, a $270 million raise announced last July, included contributions from Nvidia Corp., Oracle Corp. and other major tech companies.

Cohere’s flagship product is an LLM called Command that has similar capabilities as ChatGPT. It can write product descriptions, summarize documents and answer customer support questions. Cohere’s engineers retrain Command every week to enhance its accuracy.

Whereas OpenAI markets ChatGPT towards both consumers and businesses, Cohere focuses only on the latter market. Its Command model includes a RAG, or retrieval-augmented generation, feature that enables it to answer employee questions by drawing on an organization’s proprietary datasets. Cohere customers can deploy the LLM in their own public cloud environments.

Alongside Command, the LLM developer offers two other enterprise-focused AI models. Both are designed for search use cases. Companies can leverage them for tasks such as improving the results returned by an e-commerce website’s search bar.

Even on the high end of the range, the $500 million to $1 billion round Cohere is expected to raise would represent a small fraction of the funding its two top rivals closed in 2023. OpenAI received $10 billion worth of cloud infrastructure and capital from Microsoft Corp. last January. In September, rival LLM developer Anthropic PBC secured an investment worth up to $4 billion from Amazon Inc.

A source told the Financial Times that the more limited scope of Cohere’s fundraising push stems from its enterprise focus. The company doesn’t offer a consumer version of its LLMs like OpenAI. As a result, Cohere’s models are reportedly less expensive to train and run, which means it needs less outside capital to support its work.

It’s unknown how much ChatGPT is costing OpenAI. But the company’s infrastructure expenses are likely significant given that the chatbot’s installed base passed 100 million weekly active users last November. OpenAI’s models are also popular among enterprises: the company’s annualized recurring revenue reportedly topped $1.6 billion not long ago.

Though it doesn’t compete in the consumer chatbot market, Cohere’s AI development costs are likely still significant. Rival Anthropic reportedly told investors last year that it was planning to develop a new flagship large language model at a cost of $1 billion. The model is expected to be “10 times” more capable than the most advanced neural networks that were available on the market in early 2023. 

Image: Unsplash

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