Unlock Editor's Digest at no cost
FT editor Roula Khalaf selects her favourite stories on this weekly newsletter.
Radical Ventures, the enterprise capital firm that helped found groundbreaking AI startup Cohere, has raised nearly $800 million to launch the biggest AI fund of its kind.
The Toronto-based enterprise capital firm's third institutional fund will focus exclusively on growth-stage startups, people acquainted with the plans say. Last 12 months it raised $550 million to take a position in early-stage firms and $350 million in 2019.
Radical's investors include the family office of former Google CEO Eric Schmidt, Stanford professor Fei-Fei Li, a pc scientist dubbed the “godmother of artificial intelligence,” and former Google Brain manager Geoffrey Hinton, in addition to a variety of Canadian pension funds corresponding to CPP Investments.
CPP Investments announced in public filings this week that it had committed $75 million to the brand new fund, bringing total commitments to Radical to $204 million.
The capital raise comes at a time when some investors have begun to query the likely return on the billions of dollars which have flowed into AI startups since ChatGPT launched nearly two years ago.
“There is definitely a hype cycle in some areas of enterprise capital and AI,” said Jordan Jacobs, co-founder and managing director of Radical Ventures. “But I feel there’ll proceed to be a whole lot of money.”
He added: “There are some really huge future firms which are currently within the transition phase from early stage to growth stage and consider we’ve got the expertise and relationships to take a position.”
Jacobs declined to comment on the most recent fundraiser.
Founded in 2017, Radical was one among the primary firms to focus exclusively on investing in AI.
The firm has since backed a variety of young AI firms which have grown rapidly because the technology has boomed. It was the primary investor in AI startup Cohere, which has since been valued at $5.5 billion. Other portfolio firms include Covariant, a robotics foundation model, and drug discovery company Genesis Therapeutics.
Venture capitalists have poured heavily into AI firms over the past two years, at the same time as the broader fundraising landscape for startups has been roiled by high rates of interest, competition scrutiny on acquisitions and a largely frozen IPO market.
According to PitchBook, investments in AI led to a 47 percent increase in enterprise capital funding within the U.S. to $55.6 billion within the three months through June, the very best quarterly total in two years.
Radical was founded by Jacobs and Tomi Poutanen, who studied machine learning with Hinton on the University of Toronto. They previously ran a media start-up called Milq, which they sold in 2017 to Layer 6, the AI research lab of Canada's TD Bank.
The duo originally founded Radical to back deep learning firms as angel investors, but then sold their company to take a position full-time within the technology after publishing Attention Is All You Need, a groundbreaking AI research paper by a gaggle of Google scientists including Cohere co-founder and CEO Aidan Gomez.
“After that paper, we believed that (AI) would trigger a software substitute cycle that might have economic impact such as an industrial revolution, and that it will also advance science, such as a second industrial revolution,” Jacobs said.
“Not a single Western investor has focused on this,” he added.
