Artificial intelligence pioneers are backing a new $550mn fund dedicated to investing in AI start ups, in a move that bucks the wider downturn in tech dealmaking.
Toronto-based Radical Ventures said it has received investment from several leaders in the AI field. This includes Fei-Fei Li, creator of the influential ImageNet project, Geoffrey Hinton, the pioneer in neural networks who is also a member of the Google Brain team, and the family office of former Google chief executive Eric Schmidt. Radical said it so far raised more than half of its $550mn target.
Corporate investors such as Microsoft, SoftBank’s Vision Fund 2, IBM Ventures and Alphabet’s GV have for several years made big bets on AI start-ups through their venture arms.
But as an independent fund focused exclusively on AI and associated innovations, Radical’s war chest will be the largest of its kind. The group previously launched a $350mn fund in 2019.
Radical’s fund comes amid a huge new wave of interest from venture capitalists in start-ups after San-Francisco based OpenAI released ChatGPT, a question-and-answer tool, in November. Earlier this week, Microsoft invested $10bn in OpenAI at a $29bn valuation.
“There’s no question there’s a lot of hype and money flowing into this space,” said Jordan Jacobs, managing partner and co-founder of Radical Ventures. “We’ve had an enormous flood of inbound [interest in investing] from everyone you can imagine.”
Radical is already an investor in Cohere, a rival to OpenAI; Reka, a new start-up founded by former engineers at Alphabet-owned DeepMind; and You.com, an AI-powered search engine.
Dozens of generative AI start-ups raised early-stage funding in the final months of 2022, even as investors pulled back across the rest of the private tech market. PitchBook, which tracks VC activity, estimates $1.4bn was invested in the category last year, almost as much as in the previous five years combined.
Other Radical backers include Advance, the media group that owns Condé Nast and a big investor in Reddit and Warner Bros Discovery; the Singaporean state investment group Temasek; and CPPIB, Canada’s largest pension fund.
Dominic Barton, former global managing partner at McKinsey and chair of mining group Rio Tinto, is joining Radical as both an adviser and investor, helping its portfolio companies to build connections among large corporate customers.
Radical has also hired Aaron Rosenberg, former head of strategy and operations at DeepMind, to oversee a new London outpost, as it boosts its European investments.
Radical plans to invest in companies that are building the models that form the foundation of a wide range of AI applications, as well as more narrowly focused start-ups that might build on top of those models.
Jacobs said that ChatGPT and image-generation tools such as Stable Diffusion and Midjourney were “the very tip of the iceberg” when it came to the potential of AI.
“You’ll see all the world’s software replaced by AI over the next decade,” said Jacobs. “Every business will end up using this [generative AI technology], either directly or via third-party software that is incorporating it.”