Canadian AI startup Cohere has secured $450 million in funding from a mix of returning investors like Nvidia (NVDA.O) and Salesforce Ventures (CRM.N), along with new backers such as Cisco (CSCO.O) and Canadian pension fund PSP Investments, according to a source familiar with the matter. This marks the first tranche of Cohere’s ongoing fundraising efforts, with the company still in discussions to raise more in the same round at a $5 billion valuation, the source added, speaking on condition of anonymity.
Valuation Surge and Revenue Growth
This latest funding round represents a significant leap in valuation from Cohere’s previous private raise, where it was valued at $2.2 billion last June by investors including Inovia Capital. The generative AI company, which focuses on selling its models and applications to enterprises with an emphasis on data privacy, reported $35 million in annualized revenue by the end of March, up from $13 million last year, according to the source.
Cohere declined to comment on the matter, and Nvidia and Salesforce did not immediately respond to requests for comments.
Competitive Landscape
Cohere had initially aimed to raise between $500 million to $1 billion, as previously reported by Reuters. It competes with other AI giants like OpenAI, Anthropic, and Mistral, all of which have also secured billions in funding from strategic investors such as Microsoft, Google, and Amazon. Foundation model AI companies are in a race to secure capital to fund the costly development of AI models that require immense computing power and top-tier industry talent.
Government Support and Future Prospects
As one of the most prominent Canadian startups, Cohere stands to benefit from the Canadian government’s plan to invest C$2.4 billion ($1.77 billion) to support compute and AI research for homegrown AI companies. Founded in 2019 and headquartered in Toronto, Cohere specializes in building large language models—software systems trained on vast amounts of data that can generate text. Unlike OpenAI’s partnership with Microsoft, Cohere has avoided exclusive deals with cloud providers, despite backing from Oracle (ORCL.N).
While AI startups generally remain unprofitable due to high training costs, they are all striving to sell their technology to major corporations that can afford it for enhanced productivity. Demonstrating revenue growth is crucial for these companies as it influences their ability to attract more capital.
The funding frenzy for AI startups is already showing signs of slowing down, particularly at the early stages. According to PitchBook data, venture capital deal value for pre-seed and seed-stage AI deals plummeted by 76 percent in the first quarter of this year to $122.9 million, down from its peak of $517.7 million in Q3 2023.
