Character.AI, a startup specializing in chatbots capable of mimicking a wide range of personas and entities, is currently in preliminary discussions to secure several hundred million dollars in fresh funding. These funds have the potential to push the startup’s valuation to over $5 billion, as reported by individuals with knowledge of the matter.
Character.AI, an early standout in the field of generative artificial intelligence, has garnered significant interest from potential investors, according to insiders who prefer to remain anonymous when discussing private matters. It’s worth noting that these discussions regarding a potential deal are still in their early stages and may not materialize.
A spokesperson for Character.AI refrained from commenting on the startup’s valuation but noted that the company has achieved noteworthy milestones since it secured $150 million in funding earlier this year. The spokesperson stated, “As our user community continues to grow rapidly, so does the interest in becoming part of the groundbreaking technology we are developing and delivering. While we are engaged in constructive discussions, any speculation regarding our fundraising or valuation should be taken as such.”
Reports suggest that a potential deal could place Character.AI’s valuation in the range of $5 billion to $6 billion. In initial conversations with investors, there was even talk of a valuation as high as $10 billion, as mentioned by two sources. Nevertheless, even the lower valuation would mark a significant increase from the company’s previous funding round, which valued it at $1 billion.
Character.AI was established by former Google employees Noam Shazeer and Daniel De Freitas. The startup offers a unique service that empowers users to create a variety of chatbots capable of engaging in text-based conversations. Users have already exchanged tens of millions of messages with characters like Super Mario, a beloved Nintendo 64 character. These characters respond with AI-generated replies, such as Mario’s iconic greeting: “Hello! It’s-a me, Mario!”
Founded in 2021, Character.AI is still in its early stages, and its business model may undergo further development. Earlier this year, the company introduced a $10 monthly subscription service called c.ai+ that provides users with faster access to its messaging platform. Character.AI is part of a growing cohort of companies dedicated to developing generative AI, which is software designed to take user inputs and generate fresh content, including text and images.
As valuations for AI companies continue to rise, there’s ongoing speculation among investors about whether venture capital firms should be the primary source of funding for large-language models like the one developed by Character.AI. This is because creating and maintaining such specialized technology involves substantial computing costs. Some experts in the industry argue that it might be more sensible for these startups to seek backing from strategic investors, such as Microsoft Corp., which has committed over $10 billion to support OpenAI.
In July, tech news site the Information reported that Character.AI had been engaged in discussions with investors regarding a new funding round.