Character.AI, a 16-month-old startup that creates online chatbots, said Thursday it had raised $150 million in a recent funding round that valued the company at $1 billion.
Character.AI is among a small group of small companies, along with the giants of the tech industry, that are creating technology that could one day rival the systems under development at OpenAI, the San Francisco start-up that spurred the rise of artificial intelligence with launch. of the ChatGPT online chatbot.
These companies have an unusual combination of experienced researchers and outsized ambitions, and they require large amounts of capital. Many experts believe that a handful of companies could master the work on the new artificial intelligence.
“One of the concerns I have is that it will be a winner-take-all or winner-take-most market that a few big players really dominate,” said Erik Brynjolfsson, a professor of economics at Stanford University and a senior fellow. at the school’s Institute for Human-Centered AI.
Venture capitalists race to invest in young AI companies even as the rest of the tech industry battles layoffs, plummeting valuations and an unexpected banking crisis sparked by the failure of Silicon Valley Bank.
Like OpenAI, AI startups are building large language models, or LLMs, a kind of artificial intelligence that learns language skills by analyzing vast amounts of data from the Internet. The technology powers online chatbots like ChatGPT and can power a wide variety of other applications, including search engines, email services, and personal tutors.
LLMs can answer questions, summarize articles, write papers, and even generate computer programs, but only a limited number of companies are prepared to build systems as powerful as those recently launched by OpenAI.
The new round of funding at Palo Alto, California-based Character.AI. was led by Andreessen Horowitz, one of Silicon Valley’s best-known venture capital firms. In December 2021, the company raised $43 million in seed funding.
While at Google, Character.AI founders Noam Shazeer and Daniel De Freitas led a team that created a technology called LaMDA, short for Language Model for Dialogue Applications. The chatbot project drew attention last summer when a Google engineer, Blake Lemoine, told The Washington Post that he believed LaMDA was sensitive.
By then, Shazeer and De Freitas had left Google to create Character.AI. Having built technology similar to LaMDA, the company offers a website where people can chat with a reasonable facsimile of almost anyone, living or dead, real or imagined. The underlying technology could power many applications beyond chatbots, said Sarah Wang, a general partner at Andreessen Horowitz.
This technology requires enormous amounts of computer processing power. Mike Volpi, a general partner at Index Ventures who has invested in a Character.AI-like company called Cohere, estimated that such companies required at least $500 million to spend on raw computing power.
OpenAI has raised billions of dollars from Microsoft. Most of that money is used to buy computing power from Microsoft’s Azure cloud computing service.
Mr. Shazeer said in an interview that Character.AI would soon raise additional funds from one or more “strategic partners.” That could mean taking investments from cloud computing companies and using the money to buy computing power from those companies.
