Last May, Anthropic, one of the world's hottest ai startups, raised $450 million from investors including Google and Salesforce. It was the beginning of an astonishing wave of funding.
In August, Anthropic had raised $100 million from two Asian telecommunications companies. Then Amazon committed $4 billion to it, followed by another $2 billion from Google.
This month, venture capital firm Menlo Ventures closed a deal to invest $750 million in Anthropic.
In total, the ai startup raised $7.3 billion in one year. Its five financing deals stood out not only for their speed and size, but also for their unusual structures.
In one such deal, Anthropic agreed to use technology such as chips and cloud computing services from companies that invested in it. That meant, in effect, that some of the money raised would be returned to its investors. And to consolidate the smaller investors who were interested in Anthropic, Menlo created a legal entity known as a “special purpose vehicle.”
“These deals are very complicated,” said Dave Brown, a vice president at Amazon Web Services who was involved in Amazon's deal with Anthropic.
Despite ai's promise to transform every aspect of society, it has begun by disrupting startup arrangements in Silicon Valley. Young companies typically raise money approximately every 15 months, after demonstrating that their businesses have grown. But since generative ai, which can generate text, images, sounds and videos, burst onto the scene in late 2022, the rulebook has been thrown out as investors fight for a share of the most popular developers.
Few companies illustrate that shift better than Anthropic, which makes a chatbot called Claude and sells various forms of its artificial intelligence technology. Over the last year, the startup's valuation has tripled to $15 billion, three people with knowledge of its finances said. It reached about $8 million in monthly revenue last year and expects that to rise eightfold this year, two of the people said.
Other ai startups, including OpenAI, Character.ai, and Cohere, have reached similar investment deals as they compete to raise the most money, form the most lucrative partnerships, hire the best talent, and gain access to the most of computer chips. OpenAI recently completed a deal that values it at $80 billion or more.
Investors can't afford to lose the stock because “if you don't find the winner in the space, you're kind of out of the game,” said Ilya Strebulaev, a finance professor at Stanford.
Some investments by tech giants in ai startups have recently attracted the attention of regulators. Last month, the Federal Trade Commission said it had opened an investigation into Amazon and Google's investments in Anthropic for possible antitrust violations.
An Anthropic spokeswoman said it planned to cooperate with the FTC. The company declined to comment further. Anthropic's funding from Menlo Ventures was reported previously by The Information.
Since founding Anthropic in 2021, Dario Amodei, the CEO, and his sister, Daniela Amodei, the president, have positioned it as a startup that would build ai with guardrails. In a podcast interview last year, Dario Amodei said there was a 10 to 25 percent chance that ai technology could destroy humanity.
But if that doesn't happen, he said, “not only will it go well, it will go really great.”
From the beginning, Anthropic's financing has been unconventional. In 2021, ai-systems” title=”” rel=”noopener noreferrer” target=”_blank”>increase $124 million from investors including Jaan Tallinn, an entrepreneur known for focusing on the existential risks of technology, as well as the Emerging Risks Research Center, a Swiss nonprofit that aims to “build a guided future.” for wisdom and compassion for all sentient beings. ” (The group has changed its name to Polaris Ventures.)
In 2022, Anthropo ai” title=”” rel=”noopener noreferrer” target=”_blank”>increase $580 million for research into creating powerful ai technologies and working to ensure they do no harm. Most of that sum, which dwarfed what venture capitalists had invested in other ai startups, came from Sam Bankman-Fried, the founder of the FTX cryptocurrency exchange, and his colleagues. They belonged to a community known as effective altruists, who have long considered ai an existential risk.
When FTX filed for bankruptcy in November 2022 and control of its assets passed to a new management, Anthropic was left with an uncertain future. Their prospects reversed days later, when OpenAI launched the ai-powered chatbot ChatGPT. The technology behind ChatGPT was largely developed by Dario Amodei and others who had worked at OpenAI before leaving to create Anthropic.
That brought attention to Anthropic and Google made its first investment. Anthropic also agreed to purchase computing power through Google's cloud computing service, which it uses to train and serve its technologies.
In September, Amazon signed a similar deal with Anthropic, investing up to $4 billion. Anthropic's Claude chatbot was the most popular artificial intelligence service offered on Amazon's cloud computing system, Amazon Web Services, a person with knowledge of the matter said.
As part of the pact, Anthropic agreed to build its ai using specialized computer chips designed by Amazon. If Anthropic is successful, Amazon's shares in the new company could pay off handsomely. Meanwhile, the cloud computing deal will improve Amazon's results.
The deal was structured as convertible notes, or debt that converts to equity when Anthropic reaches certain milestones, two people familiar with the structure said.
Amazon's funding of Anthropic mirrored the way OpenAI raised money. In 2019, OpenAI raised $1 billion from Microsoft and spent most of the money buying computing power through Microsoft's Azure cloud service. Since then, Microsoft has invested an additional $12 billion in the company, with OpenAI spending most of the money on Microsoft's cloud services.
(The Times has sued OpenAI and Microsoft, alleging copyright infringement.)
Some investors have disputed These agreements are because companies like Google and Amazon are investing money that ends up strengthening their own income. The companies said the agreements were kosher.
Google's investment in Anthropic is separate from the new company's agreement to use its cloud services, said Google spokesman Daniel Gabis. “They've always been separate,” he said.
Amazon properly accounts for all revenues and expenses, said Casey McGee, an Amazon spokesperson. “To suggest otherwise, or that AWS's deal with Anthropic is anything but a normal commercial agreement, is completely false,” she said.
Even after raising billions from Amazon and Google, Anthropic knew it would eventually need more money. Generative ai startups are constantly updating, refining, and expanding their technology to make their products precise, up-to-date, and more powerful—and that requires huge amounts of expensive computing power.
Finding new investors was easy for Anthropic. But many of the interested parties wanted to invest between 10 and 25 million dollars, while the company was aiming for a much larger sum.
In November, Neerav Kingsland, director of business development at Anthropic, spoke at a conference hosted by Menlo Ventures, which had previously invested. Menlo proposed leading Anthropic's next funding round, with a twist: What if the company brought all the small investors together into a special-purpose vehicle?
The deal would save Anthropic time and simplify the process. Kingsland and Anthropic's founders agreed, a person with knowledge of the talks said.
Anthropic told investors that $15 billion was the lowest valuation it would accept, two people familiar with the situation said.
After raising the $750 million this month, Anthropic is no longer conducting a formal process to raise money, a person familiar with the situation said. But investors will soon have another chance.
As part of FTX's bankruptcy proceedings this month, the crypto company asked the US Bankruptcy Court in Delaware for permission to sell its 8 percent stake in Anthropic. FTX lawyers said they were looking to move quickly to sell the shares in conjunction with Anthropic's upcoming funding rounds.
FTX understood “that Anthropic will continue to seek additional rounds of equity financing,” the attorneys wrote.
