Last May, Anthropic, one of the world’s hottest artificial intelligence startups, raised $450 million from investors including Google and Salesforce. It was the beginning of an amazing fundraising effort.
By August, Anthropic had secured $100 million from two Asian carriers. Amazon then invested his $4 billion, followed by Google with another $2 billion.
This month, venture capital firm Menlo Ventures signed a deal to invest $750 million in Anthropic.
Overall, the AI startup made $7.3 billion in one year. The company’s five financing deals stood out not only for their speed and scale, but also for their unusual structure.
In one of those deals, Anthropic agreed to use technology from companies in which it invested, including chips and cloud computing services. This effectively meant that a portion of the funds raised would be returned to investors. And to integrate small investors interested in Anthropic, Menlo created a legal entity known as a “special purpose vehicle.”
“These deals are very complex,” said Dave Brown, vice president of Amazon Web Services, who was involved in the Amazon-Anthropic deal.
Despite AI’s promise to transform every aspect of society, it started by upending the business relationships of Silicon Valley startups. Young companies typically raise capital about every 15 months after demonstrating business growth. But the rulebook has been scrapped as investors scramble to snag the most high-profile developers since his late 2022 rapid emergence of generative AI that can generate text, images, audio, and video. .
Few companies illustrate that change better than Anthropic. Anthropic has developed a chatbot called Claude and sells various forms of his AI technology.Last year, the startup’s valuation tripled Three people familiar with the company’s finances said the deal would be valued at $15 billion. According to two of the people involved, monthly revenue reached about $8 million last year and is expected to grow about eight times this year.
Other AI startups such as OpenAI, Character.AI, and Cohere also compete to raise the most funding, form the most lucrative partnerships, hire the best talent, and have access to the most computer chips. entering into similar types of investment transactions; OpenAI recently completed a deal valued at over $80 billion.
Ilya Strebulayev, a finance professor at Stanford University, said investors can’t afford to lose out on this move, because “if you miss the winners in this space, you’re out of the game in a way.”
Some investments by tech giants in AI startups have recently attracted the attention of regulators. Last month, the Federal Trade Commission announced that it had begun investigating Amazon and Google’s investments in Anthropic for possible antitrust violations.
An Anthropic spokesperson said the company plans to cooperate with the FTC, but the company declined further comment. Anthropic’s funding from his Menlo Ventures was previously reported by The Information.
Since founding Anthropic in 2021, CEO Dario Amodei and his sister and president Daniela Amodei have positioned the company as a startup building AI with guardrails. Dario Amodei said in a podcast interview last year that there is a 10-25% chance that AI technology will wipe out humanity.
But even if that doesn’t happen, “it’s not just going to work out, it’s going to go really, really well,” he said.
Anthropic’s fundraising has been unconventional from the beginning. In 2021, we will be featuring entrepreneurs such as Jaan Tallin, who is known for focusing on the existential risks of technology, and Emerging Risk, a Swiss nonprofit that aims to “build a future guided by wisdom and compassion.” It has raised $124 million from investors including research centers. For all sentient beings. (The group name has been changed to Polaris Ventures.)
In 2022, Anthropic raised $580 million to build powerful AI technologies and research to ensure they do no harm. While most of that amount looks small compared to what venture capitalists have invested in other AI startups, most of it comes from Sam Bankman Fried, founder of the FTX cryptocurrency exchange, and his colleagues. It was something. They belong to a community known as effective altruists, which has long viewed AI as an existential risk.
When FTX files for bankruptcy in November 2022 and control of its assets is transferred to new management, Humanity was left with an uncertain future. A few days later, that outlook reversed as OpenAI released his AI-powered chatbot ChatGPT. The technology behind ChatGPT was primarily developed by Dario Amodei and others, who worked at OpenAI before leaving to create Anthropic.
That drew attention to Anthropic, and Google made its first investment. Anthropic also agrees to purchase computing power through Google’s cloud computing services and uses those services for technology training and delivery.
In September, Amazon signed a similar deal with Anthropic, investing up to $4 billion. Anthropic’s Claude chatbot is the most popular AI service offered by Amazon’s cloud computing system, Amazon Web Services, according to people familiar with the matter.
As part of the agreement, Anthropic agreed to build its AI using specialized computer chips designed by Amazon. If Anthropic is successful, shares of Amazon’s upstart stock could reap significant gains. In the meantime, cloud computing deals should boost Amazon’s bottom line.
The deal was structured as a convertible note, or debt, that turns into equity when Anthropic reaches certain milestones, two people familiar with the structure said.
Amazon’s funding for Anthropic mirrored how OpenAI was funded. In 2019, OpenAI won $1 billion from Microsoft and spent most of that money buying computing power through Microsoft’s Azure cloud service. Microsoft then poured another $12 billion into the company, and OpenAI spent most of that money on Microsoft’s cloud services.
(The Times sued OpenAI and Microsoft alleging copyright infringement.)
Some investors asked a question These deals happen because companies like Google and Amazon are investing money that will ultimately increase their own profits. Both companies said the arrangement is kosher.
Google’s investment in Anthropic is separate from its agreement to use the company’s cloud services, Google spokesman Daniel Gavis said. They “were always separate,” he says.
Amazon spokeswoman Casey McGee said the company properly accounts for all revenues and expenses. “It is completely false to suggest otherwise, that the agreement between AWS and Anthropic is not a normal business agreement,” he said.
Even after raising billions of dollars from Amazon and Google, Anthropic knew it would eventually need more money. Generative AI startups are constantly updating, improving, and expanding their technology to make their products accurate, up-to-date, and more powerful, which requires vast amounts of expensive computing power.
For Anthropic, finding new investors was easy. But while many interested parties wanted to invest between $10 million and $25 million, the company was aiming for much larger amounts.
In November, Anthropic’s head of business development, Neerav Kingsland, spoke at a conference hosted by Menlo Ventures, a previous investor. Menlo offered to lead Anthropic’s next round of funding, but with a twist. What if the company bundled all its small investors into one special purpose vehicle?
This arrangement saves humanity time and simplifies the process. Mr. Kingsland and Anthropic’s founders also agreed, according to people familiar with the talks.
Anthropic told investors that the minimum valuation it would accept was $15 billion, two people familiar with the matter said.
After raising $750 million this month, Anthropic is no longer in the formal process of raising money, according to people familiar with the matter. But investors may soon have another opportunity.
This month, as part of FTX’s bankruptcy proceedings, the cryptocurrency company asked the U.S. Bankruptcy Court in Delaware for permission to sell 8% of its Anthropic stake. FTX lawyers said they are working to move quickly to sell shares in parallel with the upcoming Anthropic funding round.
FTX understands that “Anthropic will continue to seek additional rounds of equity financing,” the lawyers wrote.
