UNITED STATES: Google, a subsidiary of Alphabet, is reportedly in discussions to invest hundreds of millions of dollars into the rapidly expanding startup, Character.AI. Founded by former Google employees Noam Shazeer and Daniel De Freitas, Character.AI has made significant strides in the AI chatbot market, attracting 100 million monthly visits to its website within the first six months since its launch.
Character.AI’s diverse range of chatbots, offering various roles and tones, has particularly resonated with the 18 to 24 age group, constituting approximately 60% of the website’s traffic, according to Similarweb data. Users of the startup can have talks with virtual versions of anime characters or celebrities like Billie Eilish. Additionally, users have the creative freedom to design their own chatbots and AI assistants, providing a unique and personalized experience.
The potential investment from Google is aimed at propelling Character.AI’s growth by enhancing its model training capabilities to meet the surging user demands. Currently leveraging Google’s cloud services and Tensor Processing Units (TPUs) for model training, Character.AI seeks to solidify and expand its collaboration with the tech giant through this substantial investment.
While both Alphabet’s Google and Character.AI declined to comment on the matter, sources familiar with the discussions informed Reuters that the startup is actively seeking capital to fortify its position in the competitive AI chatbot market. The investment might take the form of convertible notes, according to a third source.
Character.AI’s negotiations with Google come at a time when the startup is also exploring equity funding from venture capital investors. Reports suggest that these discussions could potentially value Character.AI at over $5 billion. In a funding round led by Andreessen Horowitz in March, the startup raised $150 million, reaching a valuation of $1 billion.
The broader industry trend sees major tech cloud service providers, including Google, actively investing in AI startups to incentivize the use of specific cloud services or hardware. This trend, however, has drawn the attention of regulatory bodies. The US Federal Trade Commission is reportedly examining such investments for potential anti-competitive behaviors, as indicated by Chair Lina Khan in a recent event in San Francisco.
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