Get your free copy of Editor's Digest
FT editor Roula Khalaf picks her favourite stories in this weekly newsletter.
Radical Ventures, the venture capital firm that helped launch pioneering artificial intelligence startup Cohere, has raised approximately $800 million to launch one of the largest funds in the AI space.
The Toronto-based venture capital firm's third institutional fund will focus on growth-stage startups, according to people familiar with the plans. The firm raised $550 million last year to invest in early-stage companies and $350 million in 2019.
Radical's investors include the family office of former Google CEO Eric Schmidt, Stanford University professor Fei-Fei Li, the computer scientist and “godmother of AI,” former Google Brain executive Geoffrey Hinton, and a number of Canadian pension funds, including CPP Investments.
CPP Investments said in a public filing this week that it has put $75 million into the new fund, bringing its total investment in Radical to $204 million.
The funding comes as some investors have begun to question the return potential of the billions of dollars that have flowed into AI startups since ChatGPT launched nearly two years ago.
“There's definitely a hype cycle in venture and parts of AI,” said Jordan Jacobs, co-founder and managing director at Radical Ventures, “but I think we're going to continue to see a lot of money flowing in.”
He added: “There are some very promising large companies out there right now that are moving from early stage to growth stage and we feel we have the expertise and relationships to invest in.”
Jacobs declined to comment on the latest funding.
Radical was founded in 2017, making it one of the earliest companies focused solely on investing in AI.
The firm has since backed a string of emerging AI companies that have boomed alongside the technology boom. It was the first investor in AI startup Cohere, which has since grown to a $5.5 billion valuation. Other portfolio companies include robotics-based model maker Covariant and drug discovery company Genesis Therapeutics.
Venture capitalists have flocked to AI companies over the past two years, but high interest rates, competitive scrutiny of acquisitions and a near-freezing initial public offering (IPO) market have rocked startup funding overall.
AI investments helped drive a 47% increase in U.S. venture funding to $55.6 billion in the three months ending in June, the highest quarterly total in two years, according to Pitchbook.
Radical was founded by Jacobs and Tomi Putanen, who studied machine learning with Hinton at the University of Toronto and previously ran the startup Milk and founded AI company Layer6, which was acquired by Canada's TD Bank in 2016.
The two originally founded Radical to back deep learning companies as angel investors, then sold the company to invest full-time in the technology after the publication of the groundbreaking AI research paper “Attention Is All You Need,” written by a group of Google scientists including Cohere co-founder and CEO Aidan Gomez.
“After that paper, we thought that[AI]would trigger a software replacement cycle that would have economic effects similar to the Industrial Revolution, and also open the door to a second Industrial Revolution-like science,” Jacobs said.
“There were zero Western investors looking at this,” he added.
This story has been corrected to clarify that Layer 6 was founded in 2016 and later acquired by TD Bank.
