May 27, 2024

San Francisco-based artificial intelligence startup Anthropic is on the verge of raising about $300 million in new funding, two people familiar with the matter said, in the latest sign of frenzied excitement for a new breed of artificial intelligence startups.

The deal could value Anthropic at about $5 billion, though terms are still being worked out and the valuation could change, one of the people said. The startup, founded in 2021, previously raised $704 million at a valuation of $4 billion, according to PitchBook, which tracks private investment data.

Silicon Valley has been gripped by a frenzy of startups working on “generative” artificial intelligence, a technology that can generate text, images and other media based on brief prompts. This week, Microsoft invested $10 billion in OpenAI, the San Francisco startup that made waves in November with ChatGPT, a chatbot. ChatGPT has won praise from over 1 million people for its ability to answer questions in clear, concise prose.

Investors are chasing deals like artificial intelligence companies even as funding for other start-ups has dried up, suggesting at least one bright spot in an otherwise bleak tech investment market.

Other funding deals in the works include Character.AI, which lets people talk to chatbots that mimic celebrities. The startup has held discussions about a larger round of funding, according to three people familiar with the matter.

Replika, another chatbot company, and, which is rolling out similar technology into a new search engine, say they have also received unsolicited interest from investors.

All focused on generating AI As the result of more than a decade of research inside companies like OpenAI, these technologies are poised to reshape everything from online search engines like Google Search and Microsoft Bing to photo and graphics editors like Photoshop.

A surge of interest in generative artificial intelligence has investors and startups racing to pick their teams. Startups want to take money from the most powerful investors with the deepest pockets, and investors are trying to pick winners from a growing field of ambitious companies.

The stakes are high. For competitive reasons, venture capital investors typically do not back multiple companies in the same class. So a bad bet now could lead to missed opportunities to make money on other trades.

As exciting as it is, few of these start-ups have clear plans to make money. That’s rarely a problem in Silicon Valley; past generations of investors put money into social media sites or mobile apps, thinking they’d figure out how to turn a profit later.

But that strategy has been less certain in recent years, as startups have expanded beyond the tech industry, which sells software or advertising. Certain businesses, such as on-demand delivery, ride-hailing apps and subscription meal kits, have taken longer to make money than investors had hoped, or not made money at all.

Anthropic was founded by a group of people, including several researchers who left OpenAI. Its financing talks stand out for its early backers. The vast majority of its funding came from disgraced cryptocurrency entrepreneur Sam Bankman-Fried and his colleagues at FTX, the cryptocurrency platform that collapsed last year amid fraud allegations. That money could be recovered by bankruptcy court, leaving Anthropic in a bind.

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