TORONTO — Cohere has raised US$500 million from investors as it looks to compete in the crowded market for AI agents. The funding round, led by Canadian financiers Radical Ventures and Inovia Capital, values the startup at US$6.8 billion.

The company: Cohere sells large language models (LLMs) and AI applications to businesses. It has targeted large firms in sectors with heavy regulatory requirements like banking, healthcare and professional services. Last week, the 450-person firm made its flagship product, a system called North used for building AI agents, widely available. It has already rolled out customized versions of the product for a handful of large clients like RBC, Bell and Saudi Arabian telecom company STC Group.

“We are at a pivotal moment in accelerating the delivery of secure AI that empowers enterprises worldwide,” Cohere CEO Aidan Gomez said in a statement.

The new financing comes a year after the firm announced a US$500-million Series D round at a US$5.5-billion valuation. The startup has now raised about US$1.5 billion in total since its founding in September 2019.

The investors: Radical and Inovia co-leading the new fundraising round means both firms are doubling down on Cohere. 

Toronto-based Radical has assembled a portfolio of leading AI startups developing models and applications around the world. Radical and Cohere go way back—the venture firm began working with the startup’s founders even before they incorporated, and wrote its first cheque. Its new investment is from its first near-US$800 million venture growth fund, which it raised last year.

Radical is looking for “opportunities for outsized returns,” said managing partner Jordan Jacobs. “Cohere has a fast-growing customer base of blue-chip enterprise and government customers globally.” He also cited the firm’s focus on security and privacy as a selling point in the LLM and agent markets.

Inovia, meanwhile, led Cohere’s US$270-million Series C in June 2023, a flagship deal for the Montreal-based software investor’s push into generative AI. Inovia’s new investment comes out of its latest US$350-million growth fund. 

The fund looks for “Canadian companies that can be truly international champions,” said Inovia partner Patrick Pichette, who is joining Cohere’s board as part of the deal. The firm is “selling to enterprise” and “making money on every contract,” he said, contrasting it favourably with other “big-bet companies that are burning gazillions of dollars.”

Pichette said the startup’s combination of models, applications and the tools to run them is a “strategic asset” when selling to large firms that have significant security and compliance requirements. 

OpenAI and other AI firms have hired in-house teams of engineers to install their technology for clients. Cohere is “pretty human-light to deliver these customer contracts,” Pichette said, with “no armies of people” deployed with customers for months on end. That’s also helping it grow faster, he said.

Both Jacobs and Pichette cited the rapid recent increase in Cohere’s business. The startup is reportedly generating US$100 million in annualized revenue—monthly sales projected over a year-long period—and is aiming for US$200 million at year-end. That’s up from a reported  US$35 million as of March 2024. “It’s a completely different trajectory of growth,” Pichette said.

Other returning Cohere backers include PSP Investments, software major Salesforce, and chip giants AMD and Nvidia. The Healthcare of Ontario Pension Plan invested in Cohere for the first time, giving it backing from two of Canada’s Maple 8. 

The star hires: On Thursday, Cohere also announced two new additions to its senior leadership team. The firm has recruited former Meta AI research head Joelle Pineau as its new chief AI officer, amid red-hot competition between tech firms for the field’s top scientists.

Cohere also named Francois Chadwick as chief financial officer, based in San Francisco. He was most recently a partner at KPMG, but previously served as CFO of startup Shield AI, and before that as Uber’s global head of tax and accounting.

The competition: Cohere has fewer people and less money than some of its AI rivals. Market leader OpenAI is constantly adding capital, and is reportedly worth US$300 billion. Meanwhile, months-old startups Thinking Machine Labs and Safe Superintelligence, led by former executives of the ChatGPT maker, have already raised more than Cohere at higher valuations all before launching any products. 

But Cohere says it’s playing a different game, because it makes applications for businesses rather than consumers, and is not pursuing smarter-than-human artificial general intelligence (AGI). “My mantra is, ‘ROI, not AGI,’” co-founder Nick Frosst said in a recent media briefing. “I want this technology to be useful now.”

Editor’s note: This story has been updated with comments from Radical Ventures managing partner Jordan Jacobs and Inovia Capital partner Patrick Pichette, and to correct some details about Inovia’s growth fund.