Cohere Lands $270 Million in Funding from Tech Heavyweights - LLM Battles to Intensify
The big valuation follows Anthropic's recent announcement
TLDR;
Cohere raised $270 million in Series C funding. Earlier rumors suggested the round would assign a $2 billion valuation.
The round was led by Inovia Capital, with participation from NVIDIA, Oracle, Salesforce Ventures, Index Ventures, and others.
The funding will be used to accelerate Cohere's growth in the enterprise market. It will also be used to pay what are thought to be eight-figure monthly cloud computing bills.
Cohere's AI platform is built to be available on every cloud provider, deployed inside a customer's existing cloud environment, virtual private cloud (VPC), or on-site.
Cohere recently announced collaborations with Salesforce Ventures and LivePerson.
Cohere, a leading generative AI large language model (LLM) competitor to OpenAI for enterprise use cases, announced $270M in new capital today as part of its Series C financing. This brings Cohere’s total funding to $435 million, according to Crunchbase.
While the official announcement did not reveal a company valuation, a Financial Times report in May suggested the company was expected to raise at $2 billion post-money. So, investors were buying in at around a $1.73 billion pre-money valuation. Inovia Capital led the round, with participation from NVIDIA, Oracle, Salesforce Ventures, DTCP, Mirae Asset, Schroders Capital, SentinelOne, Thomvest Ventures, and Index Ventures.
Large Language Models = Large Expenses
These giant funding rounds always involve paying for inference and AI model training expenses. Rumors suggest Cohere is spending over eight figures in monthly cloud computing costs. To put the funding round in perspective, $270 million is less than two years of cloud computing bills and that is before you add user growth.
Beyond that, Cohere is competing against the OpenAI-Microsoft tandem for enterprise users as well as NVIDIA, Anthropic, AI21, and others, including a long list of open-source AI models.
Anthropic is clearly a key competitor for Cohere. One of the two will likely emerge as a key alternative to OpenAI, Google, and NVIDIA. Anthropic just raised $450 million from a group of investors, including Google and Salesforce Ventures. Many large language models (LLMs) will be used in enterprises, but investors are betting just a few will command significant market share. That means they must be well funded to drive further R&D advances, improve product packaging, and aggressively sign up customers.
There is significant effort involved in adopting LLM-based generative AI solutions. Some companies may go to market with several LLMs segmented by use case. However, they are unlikely to switch to a competing provider unless there are significant problems with the AI models in production. Companies are more likely to try to improve their incumbent solution than start over. So, speed to market awareness and adoption is critical. That requires a large investment in sales to compete with Microsoft and the others.
LLMs seem so easy to try out that the switching costs would be low. However, that is for proof-of-concept testing. The biggest switching cost components may be related to process and policy. Once you have run that gauntlet, technology managers will not relish the idea of doing it again.
From Novelty to Enterprise Decisions
“As the early excitement about generative AI shifts toward ways to accelerate businesses, companies are looking to Cohere to position them for success in a new era of technology,” said Aidan Gomez, CEO and co-founder of Cohere, in the official announcement.
The mention of a shift is important. ChatGPT and other generative AI solutions wowed everyone. As enterprises consider taking generative AI to production, new requirements emerge. Some include greater control over the production environment, model performance, and user data. Cohere and companies such as Anthropic are leaning into the idea that today’s generative AI leaders maintain control over model performance and data.
That messaging requires some awareness building which will be one focus for the new round of funding. In addition, bringing generative AI into enterprises is new to nearly every company executive. Educating the market will be a key element of success, and you can see that Cohere is already ramping up its educational resources.
It costs a lot to build and maintain generative AI foundation models. It also costs a lot to drive adoption while your competitors are trying to scoop up market share. So, expect some more of these large funding rounds. The companies that receive them won’t all be wildly successful. However, their path to success will be far harder without a large cash war chest.
