Generative artificial intelligence startup AI21 Labs Ltd. is rolling in money today after closing on a bumper $155 million Series C round of funding to fuel the growth of its large language model-based services.

The round attracted some big name investors, including Walden Catalyst, Pitango, SCB10X, b2venture, Samsung Next, Google LLC, Nvidia Corp. and professor Amnon Shashua. The round comes just over a year after AI21 Labs closed on a $64 million Series B round of funding in July 2022. The company has now raised $283 million in total, bringing its valuation to $1.4 billion.

AI21 Labs is both a research lab and a commercial operation that’s focused on natural language processing, a subset of AI. It has some notable founders, including its co-Chief Executive Yoav Shoham (pictured, right), a Stanford professor emeritus and serial entrepreneur who has already sold two companies to Google LLC. There’s also Amnon Shashua (center), a professor at Hebrew University and founder of Mobileye NV, which was acquired by Intel Corp. for $15.3 billion in 2017, and Ori Goshen (left), founder of the crowdfunding platform CrowdX Ltd.

The startup’s mission is to shift and shape the way people read and write by making AI a “thought partner” to humans, and to achieve that it has created a number of NLP-based applications.

Its apps are based on what AI21 Labs says is the world’s most customizable and sophisticated LLM, Jurassic-2. It can be used by companies to build advanced, chat-based AI apps capable of performing many tasks at scale. Notably, Jurassic-2 powers the startup’s AI21 Studio, which is a developer platform for building custom, text-based applications; Wordtune, a multilingual reading and writing AI assistant; and Wordtune Read, which is used to analyze long documents in seconds and create a simplified summary.

AI21 Labs has also built its own chatbots, similar to ChatGPT. One of its quirkiest is the Ask Ruth Bader Ginsburg AI bot, which was trained on more than 27 year’s worth of published interviews, speeches and written texts from the late U.S. Supreme Court Judge of the same name.

The startup says Jurassic-2 provides an advanced baseline for companies to design and train their own chatbots using proprietary data. It also supports multiple languages, including Dutch, French, German, Italian, Portuguese and Spanish. Some of the companies using Jurassic-2 include the video game development platform Latitude.io, which uses generative AI to scale the production of its gaming worlds, and the youth employment accelerator Harambee, which has created a custom chatbot to increase signups to its programs.

AI21 Labs has an advantage over some of its competitors, as its Jurassic-2 model is generally more accurate than other custom LLMs, said Constellation Research Inc. Vice President and Principal Analyst Andy Thurai. “It’s comparatively cheaper to consume too, and its text generation and summarization capabilities, plus applications built on top of it, like Wordtune, are very good,” he added.

With the funding from today’s round, Shoham told TechCrunch, the company will accelerate its research and development programs in order to achieve its goal of “developing the next level of AI.” At the same time, it also wants to pursue more partnerships with companies across the entire technology ecosystem and boost its employee base, which currently numbers around 200.

Generative AI startups have attracted massive amounts of funding this year thanks to the rise of Open AI LP’s ChatGPT, which created tons of excitement over its possible applications and productivity gains.

OpenAI is considered to be one of the industry leaders, and was boosted earlier this year by a $10 billion investment from its partner Microsoft Corp. Other big raises include Anthropic, a rival to both AI21 Labs and OpenAI, which closed on a $100 million investment from South Korean telecommunications giant SK Telecom Co. Ltd. earlier this month. That came after it raised $450 million in May. There’s also Cohere Inc., which raised $270 million from Oracle Corp., Nvidia and other backers in June.

Thurai said it’s not surprising that AI startups are raising such enormous amounts of cash at dizzying valuations. He said the reasons include the hype around generative AI and LLMs, and the costs involved in curating data, training models and hosting them. Many AI startups are letting customers train and host their models at low prices too, in order to gain traction in the market. So they need serious backing from investors.

“While AI21 spent only a fraction of what OpenAI has, it is still burning through a lot of money and upkeep is not cheap,” Thurai said. “Hosting AI models can run into millions of dollars per year.”

However, Thurai said he’s not certain if the money being funneled into AI startups is sustainable, especially considering that there are some very good open-source alternatives to OpenAI’s GPT and AI21’s Jurassic-2 models. “Examples include the LLaMa2 model created by Meta, and the Falcon model series, which are both very accurate,” Thurai said.

As such, the analysts believes there will be a time when reality catches up with the industry. “Sooner or later enterprises are going to figure out ways to train these open-source models themselves, or even create their own at much lower costs,” Thurai said. “Then the crazy valuations will come back down to Earth. But until that happens, enterprises will continue to use these services.”

For now, at least, we can expect investors to continue throwing money at AI startups, joining the likes of Typeface Inc., which raised $100 million in June, and others like Inflection AI Inc., Runway AI Inc. and Stability AI Ltd.

Photo: AI21 Labs