Andreessen Horowitz Funds Ex-Google Employees' Chatbot Startup Character.AI for $1 billion

Taking advantage of venture funders' insatiable appetite for transactions in the hottest technology sector is Character.AI, an artificial intelligence start-up created by two former Google workers.

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The two-year-old company announced on Thursday that it had raised $150 million in a funding round led by Andreessen Horowitz worth $1 billion. After leaving Google in 2021 to form Character.AI, Noam Shazeer, and Daniel De Freitas contributed to the architecture utilized in well-known chatbots.

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Character.AI claimed that its technology enables "customers to construct a fully-customizable and customized AI companion with a distinct personality and values" in a news release announcing the funding.

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The funding round comes in the wake of significant initiatives by Google and Microsoft to create and integrate chatbot software into essential products. This will bring AI-generated responses to searches, documents, and emails. After Microsoft-backed OpenAI launched ChatGPT in November and saw the free experimental service go viral, big tech companies and VCs are swarming into the market.

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Microsoft released a ChatGPT-integrated Bing search engine in January. Google unveiled a test version of Bard, its chatbot, earlier this week.

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There are some parallels, but Freitas of Bard believes Google will never do anything fun." Because we were employed there.”

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According to CharacterAI, the new funding comes from the government, which would enable it to "extend its computing powers resulting in a more sophisticated model with enhanced reasoning and greater accuracy.” It will also help the firm expand its 22-person staff and add technical skills. The business said that it is getting close to 100 million monthly visitors, "a four-fold rise in two months."

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The supposedly pre-revenue firm valued at ten figures is comparable to other recently overhyped technologies like cryptocurrency (or more generally Web3) and social audio. Price increases in both markets have been significantly attributed to Andreessen Horowitz. In the middle of 2022, when digital currencies were in freefall, the company unveiled a $4.5 billion crypto fund. A year prior, it increased its stake in the early-stage business Clubhouse, valuing it at $4 billion. Once the economy resumed after the shutdown, the Clubhouse buzz subsided.

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Character.AI made no further comments.

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Character.AI is rapidly and significantly advancing generative AI, according to Sarah Wang, a partner at Andreessen Horowitz, who stated in the press release that "Character.AI has the potential to transform how humans connect not just with AI, but more broadly reinvent how we interact with technology as a whole in our everyday lives."

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Nat Friedman, a former CEO of GitHub, Elad Gil, A Capital, and SV Angel are further investors.

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Shazeer is the kind of individual who "can go into their basement for 18 months and change the world," according to Jill Chase, the AI investments head at Alphabet's late-stage venture organization Capital G, who spoke with Trade Algo previously.

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“I've been with Noam a lot,” she said. ”He is a brilliant technologist.”