Google is in talks to invest hundreds of millions of dollars in Character.AI, a startup that lets users chat with AI chatbots based on celebrities or fictional people, Reuters reported on Saturday citing two unnamed sources with the knowledge of the matter. The AI firm is reportedly also in conversations with VCs to raise new funds at a valuation of over $5 billion.
That would mean a 5x increase in valuation in less than a year. Character.AI last raised $150 million in a round led by A16z in March. Google, according to the latest report, is looking to invest, through convertible notes.
Founded in 2021 by Noam Shazeer, and Daniel De Freitas, who previously worked as developers on Google LaMDA, Character.AI was launched in November as web-based platform, allowing users to create and chat with AI characters. The startup also launched a mobile app in March and added group chats as a feature just last month.
Character.AI is free to use but also offers a paid version that allows users to skip the queue to chat with AI characters and provides faster response times.
Its website receives between 150 million and 200 million visits every month, and according to a report by A16z, it is the second most popular generative AI product, behind only ChatGPT.
As it enables users to engage in conversations with celebrities or fictional characters, a significant portion of its user base falls within the younger demographic, particularly those aged between 18 and 24. According to Similarweb statistics, this age group constitutes 60% of the company’s total users. This demographic distinction sets Character.AI apart from the likes of OpenAI’s ChatGPT and Google Bard.
If the startup goes on to raise funds at a valuation of over $5 billion, it would become one of the most highly valued AI startups in the world.
The investment by Google, per report, will help solidify the existing partnership between two companies. Character.AI uses Google Cloud and its Tensor Processing Units (TPUs) to train its models.
Google has been heavily investing in AI by making investments in its own products and supporting AI startups externally. Its most recent notable investment is $2 billion in Anthropic, a rival to OpenAI.
