TheChek News Flow

• AI21 Labs is nearing a new round of funding that would value the company at $1.2 billion

• The new capital would bring total funding for the company to at least $278 million

• Israel-based AI21 Labs offers a writing assistant for consumers and access to its large-language model for developers

I21 Labs, an Israel-based rival to OpenAI, has neared a new round of funding that would value the six-year-old startup at around $1.2 billion, according to two people familiar with the matter. It’s the latest sign of investor appetite for firms developing conversational artificial intelligence as the technology becomes a material business for OpenAI.

Two of the startup’s existing investors, Walden Catalyst and Israeli firm Pitango, have been in talks to lead the new funding, which would be at least $150 million, according to a person with direct knowledge of the situation. The investors would be paying for the shares at a valuation that’s at least 20 times the startup’s projected revenue for this year, a lower valuation multiple than for deals involving other AI startups with similar revenue.

The investment would bring AI21’s total funding to more than $278 million, among the largest sums for a developer of large-language models. AI21 is one of a handful of OpenAI rivals that Google and Microsoft were watching closely at the start of this year, but it will be the last of those startups to exceed a $1 billion paper valuation. Investors valued the startup on paper at $750 million a year ago. (See The Information’s Generative AI Database here.)

Though Walden Catalyst has flown relatively under the radar, its co-founders, Lip-Bu Tan and Young Sohn, are well known in Silicon Valley, having served as executives and board members for semiconductor companies including Intel and Inphi.

Tel Aviv, Israel–based AI21 Labs was founded in 2017 by three veteran entrepreneurs: Yoav Shoham, a Stanford University computer science professor who founded a calendar-scheduling startup acquired by Google; Ori Goshen, who founded telco analytics and network optimization startup CrowdX; and Amnon Shashua, who founded autonomous driving company Mobileye.

AI21 Labs recorded revenue of $20 million in 2022, according to two people familiar with the matter, and projects revenue of $50 million for this year, one of those people said. Most of its revenue comes from Wordtune, an AI writing assistant for consumers, according to the people familiar with the business. AI21 Labs recently launched an AI-powered text analysis and summarization feature for Wordtune.

Separately, AI21 Labs sells access to Jurassic-1, its LLM, which competes with software from bigger rivals such as OpenAI and Anthropic.

AI21 Labs has tried to differentiate itself by providing models that are smaller and cheaper to run compared to those of other startups, Goshen previously told The Information. “The size of the model is not everything,” he said, adding that it’s more important for the model to give accurate information.

Still, AI21 Labs faces stiff competition, both from developers of proprietary models like OpenAI and from free open-source models like Meta Platforms’ Llama 2.