Key Points:
- Toronto-based AI startup Cohere is in advanced discussions to secure $500 million in funding at a valuation of approximately $5 billion.
- The company’s annualized revenue run rate has surged to $22 million, driven by the launch of its new model, Command-R.
- Cohere focuses on enterprise-oriented AI models and plans to expand its reach to other major cloud providers.
- Last valued at $2.2 billion in June, Cohere’s new valuation target signifies investor confidence in its growth prospects.
According to a source familiar with the matter, Cohere, an artificial intelligence startup based in Toronto, is reportedly in advanced discussions to secure $500 million in funding at a valuation of approximately $5 billion. The company, which develops foundation models to compete with OpenAI, has witnessed a significant surge in its annualized revenue run rate, soaring from $13 million in December to $22 million this month, with the introduction of its new model, Command-R.
Founded by former Google researchers, Cohere has been actively pitching its growth potential to investors by focusing on enterprise-oriented AI models. Additionally, the startup partners with Oracle and plans to expand its reach by making its models accessible on other major cloud platforms.
Last June, Cohere was valued at $2.2 billion following a funding round that raised $270 million from investors, including Inovia Capital, Nvidia, and Oracle. However, the latest valuation target of $5 billion signifies a substantial increase in the company’s perceived value, reflecting investors’ confidence in its growth trajectory.
Despite the moderate revenue figures, investors’ interest underscores the optimism surrounding the future adoption of AI models. Foundation model companies like Cohere are racing to secure capital to support the expensive development of AI models, which require significant computing power and top-tier talent.
Cohere is vying against giants like OpenAI and Anthropic in the competitive landscape while focusing on AI business applications. OpenAI, for instance, has projected $1 billion in revenue for 2024 and has garnered substantial investment from tech behemoths like Microsoft.
However, the fervor to fund AI labs, especially those yet to turn profitable, has raised concerns among some venture capital investors. They question whether foundation models will generate sufficient revenue relative to the massive capital required for their development.
