Character.AI could gain incredible amounts of capital in Google-funded convertible notes. The move will deepen existing ties between the startup and Alphabet-owned Google (GOOGL), according to Reuters’ sources.
Google is reportedly in talks to finalize an investment of hundreds of millions into Character.AI. The chatbot-creator startup, founded in 2021, uses Google’s cloud services and Tensor Processing Units (TPUs) to train models. Anonymous sources reveal that the discussions are still ongoing, and the terms of the deal could change.
Similar news had emerged in September, stating that Character.AI was aiming to raise funding from venture capital investors that could bring its valuation to over $5 billion. A spokesperson for the company had reportedly said, “As our community of users continues to snowball, so does interest in being part of the revolutionary technology we are building and delivering,” adding, “While we continue to have productive conversations, any speculation about our fundraising or valuation is just that.”
The reports followed talks of the startup raising $150 million in March 2023, and gaining a $1 billion valuation.
Founded by former Google employees Noam Shazeer and Daniel De Freitas, Character.AI offers chatbots that can impersonate public figures (for example Billie Eilish, Twice’s Nayeon, and Apple CEO Tim Cook) as well as anime characters, and professionals (language teachers, therapists, etc.). Moreover, a portion of the chatbots also generate images based on users’ messages and inputs. The platform is free to use, but a $9.99 subscription allows users to skip the virtual queue and gain priority access to the chatbot.
AI models like Character.AI’s are notoriously expensive to develop. Sophisticated systems require eye watering amounts of investor funding to train advanced versions of their models. On the other hand, tech giants like Google appear to be hunting for an opportunity to snag bragging rights — for the next most successful AI platform.
This dynamic has resulted in the formation of a fast-paced monetary ecosystem — a win-win situation not just for tech giants, but also the many AI startups competing aggressively in the industry. AI needs capital, and tech giants want AI.
Only two weeks ago, Google committed $2 billion in funding to Anthropic AI (despite copyright infringement lawsuits slapped onto the startup from labels UMG, Concord, and ABKCO). This investment was broken up into $500 million upfront in October 2023, and the commitment of $1.5 billion to join Anthropic’s funding pool over time. Before this payout, Google had already invested $550 million in Anthropic last year.
Previously, Google had also poured capital into AI startup Runway, which creates video production tools, and an open-source software service called Hugging Face. Google has also spent several of its (many) billions on its own AI systems, including the unreleased ‘Gemini’ — developed to rival ChatGPT.
Google isn’t the only investor backing AI startups. Amazon, Microsoft, and others aren’t shying away from generously replenishing AI platforms’ funding chest — hoping for another overnight AI success (aka ChatGPT).