“Generative AI” is the keyword to attract capital in Silicon Valley right now. There is a gold rush where everyone wants to invest in startups in this category.
Four leading AI researchers left Google earlier this year to build the startup Mobius AI.
They were unsure what the product would look like, except that it would involve AI technology that can generate its own photos and videos.
That concern was unnecessary. Within a week, two of Silicon Valley’s top venture capital firms, Andreessen Horowitz and Index Ventures, had each come up with a financing offer, according to the New York Times.
$100 million in one week
Suddenly, Mobius, which the NYT describes as “just four guys and a laptop” – was valued at around $100 million, a fairly high number for a start-up that was only a week old or so.
When news of the offers leaked out, other investors stepped in to encourage Mobius to take their money too.
Gold rush for AI companies
This is the latest example of the gold rush around newly started companies working with generative AI, which has prevailed in recent months.
Interest among investors has increased so quickly that valuations have skyrocketed above the 2021 all-time high bubble.
Blame the chatbot
The financing race has become real since ChatGPT, the chatbot from OpenAI, went viral last year by demonstrating the power of AI’s ability to generate its own tweets, emails, articles, responses, and ideas. Investors desperate for the next big trend are competing fiercely to invest in these companies and giving AI entrepreneurs nine-digit valuations for little more than an idea and a resume, writes NYT.
“We are in the phase of the market where it, like, lets a thousand flowers bloom,” says Matt Turck, an AI specialist investor at venture capital firm Firstmark.
The blooming flowers include Dust, a startup founded by former Open AI employees.
The millions are rolling in
Dust is in a funding round for $5 million led by Sequoia Capital, which will value it at $30-40 million, say two insiders.
Perplexity AI, a startup created by former employees of Open AI, Google, and Meta, is raising $20-25 million, led by Nea, which values the company at about $150 million, according to two sources.
Langchain, a newly started company working on software that helps other companies incorporate AI into their products, has raised funds from Benchmark, according to another source.
At Y Combinator, the startup incubator, at least 50 of the 218 companies in the current program have generative AI, according to a compilation by Truewind, which is part of the program.
Understanding the AI opportunities
Alex Lee, Truewind’s CEO, says that ChatGPT has helped investors, potential customers, and employees understand the technology’s opportunities. “Now they say, ‘Oh, I’ve played with ChaptGPT, and I can imagine how I could use this in my world,'” says Alex Lee, according to The New York Times.
Building a large fund
Last week, Salesforce announced a $250 million fund for investments in startups in generative AI, alongside new investments in Cohere and Anthropic.
“There are a few opportunities in technology where you really see a generational leap forward with revolutionary technology,” says John Somorjai, who leads Salesforce’s risk investments.
“These companies are the next billion-dollar opportunity in software.”
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