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  • Writer's pictureStefanos Christou

Big Companies going all in for Generative AI Startups

Earlier today, Typeface secured a staggering $100 million in funding at a valuation of $1 billion, a remarkable feat considering the company's inception in 2022. This recent investment round has once again brought to the forefront the trend of rapid-fire venture funding at unicorn valuations. However, what truly caught attention in Typeface's funding is the noteworthy list of investors involved.


Leading the round was Salesforce Ventures, the renowned CRM and cloud giant that recently unveiled a $500 million fund specifically dedicated to backing generative AI startups. While Salesforce's participation in this deal may not come as a complete surprise, considering their venture into the AI space, the company found itself in the company of unexpected partners: Alphabet, through its GV investing arm, and Microsoft, through its M12 investing initiative, both decided to invest in Typeface.


This confluence of seemingly disparate investors raises a compelling question: Where else are major corporate venture capital (CVC) investors directing their resources? To gain insight into the situation, let's examine the recent deals made by several historically active CVC arms of prominent tech companies. It becomes evident that Typeface's funding round, with its internally competitive investor lineup, is not an outlier in terms of Big Tech dollars flowing into the coffers of startups. The tech giants are buzzing with activity these days.


What's driving this sudden surge of investment? Generative AI, once merely an intriguing research project, has triggered a wave of competition, acquisitions, and investments within large tech companies.


Companies like Databricks and Snowflake are acquiring startups to bolster their own generative AI capabilities, highlighting the immense appetite for companies operating in this domain.


Why is this happening? Investors, founders, and numerous CEOs have expressed their belief that generative AI technologies hold the potential to significantly enhance business operations across a wide range of industries. These technologies can increase worker efficiency, enable products and services to achieve more while lowering costs, and, in some cases, even replace certain job categories entirely. In short, generative AI is expected to boost profitability and agility for businesses.


Given that every company strives to increase its revenue, it's no wonder that every industry seeks to harness the power of generative AI. However, this presents both an opportunity and a risk for incumbent tech companies. The opportunity lies in their ability to leverage their customer relationships and vast data repositories, utilizing generative AI to enhance their own business endeavors. On the flip side, there is a risk that innovative startups armed with new generative AI techniques may encroach on the territory of Big Tech incumbents.


Flush with cash, the major tech players are taking decisive action by investing in and building their own generative AI capabilities. One effective strategy to stay ahead of potential competition is to acquire a significant stake in promising startups. This approach offers valuable insights into their operations, the possibility of strategic partnerships, potential financial gains, and the option to acquire the startup outright if it aligns with their goals or to impede competitors.


If our assessment holds true, we should witness a flurry of investments by Big Tech companies in generative AI startups. And indeed, that's precisely what's happening. The following list provides a glimpse into the broader landscape of AI-powered startups that have attracted the attention of major tech companies' CVC arms. While it encompasses ventures beyond generative AI, it effectively demonstrates the ongoing trend:


M12, Microsoft's venture capital fund, has invested in Typeface's Series A and B rounds this year. Additionally, M12 participated in fundraising rounds for Hazy, a synthetic data startup with AI applications, Private AI, Modl.ai, Insite AI, and Inworld AI. Microsoft has also made significant capital injections into OpenAI in recent years.


Alphabet's GV arm, apart from participating in Typeface's Series B and Series A rounds, has invested in Synthesia, Lightmatter (chips for AI), Cognosys (AI agents), Moonhub (AI-powered recruiting), and Altana AI.


Intel Capital, known for its active CVC investments, recently backed MatrixSpace (AI-enabled sensing tech) and Alkymi, with the latter having a focus more on machine learning (ML) than AI.


Salesforce Ventures, in addition to leading Typeface's latest funding round, has invested in Anthropic, a startup that aims to rival OpenAI in building models. Furthermore, Salesforce has written checks for Simpplr (AI-powered employee experiences) and Cohere (providing access to LLMs via APIs), and has also backed Hearth.AI, Faros AI, and You.com.


Baidu Ventures, a prominent CVC based in China, has made recent investments in Shengshu-AI, Xihu Xinchen, and HeyGen. Baidu is also actively establishing an AI-focused venture fund, following in the footsteps of Salesforce.


This list is not exhaustive, as some major tech companies make separate investments outside their venture arms, and not every deal is publicly reported. By the end of the year, we can expect this roundup to expand considerably, with the inclusion of additional players. For instance, Zoom Ventures has engaged in AI deals, investing in UpdateAI, Anthropic, and Prezent.ai, while Oracle has placed its bets on Cohere and SentinelOne.


Today, Forbes reported that Inflection AI secured an impressive $1.3 billion in new funding. Notable backers include LinkedIn co-founder Reid Hoffman, Microsoft co-founder Bill Gates, former Google CEO Eric Schmidt, and Nvidia as the sole new investor among this group. The influx of capital from such influential figures emphasizes the continuing trend of excessive capital flowing into the industry. It seems like just yesterday when we thought these developments—startups raising nine-figure rounds and multiple funding rounds within a year—were exclusive to the venture boom of 2021. Yet, here we are again!


As long as your founding team possesses a strong AI background and a plan to offer AI technology to major corporations, you can expect an influx of capital from both Big Tech funds and traditional venture investors alike. The stage is set for a new era of investment in the AI landscape.

Generative AI
Generative AI

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