Artificial intelligence startups Cohere Inc. and Aleph Alpha GmbH today announced that they intend to merge.

The transaction is backed by Schwarz Group GmbH, Germany’s largest retailer. It plans to lead a funding round into the combined company by making a $600 million “structured financing commitment.” CNBC reported that the Series E deal, which is also expected to draw other investors, will close later this year.

Toronto-based Cohere has raised about $1.6 billion in funding from Nvidia Corp. and other backers since launching in 2019. The company offers several AI model families that are each optimized for a different set of use cases. Some focus on narrow tasks such as data search, while others can automate multistep business workflows.

Cohere’s most capable model, Command A Reasoning, made its debut last August. It supports prompts with up to 256,000 tokens and has a tool use feature that can carry out work in business applications. A so-called token budget setting enables customers to limit the amount of computing capacity the model uses, which helps avoid cost overruns.

Cohere sells its models on a standalone basis and as part of two productivity tools. The first, North, enables workers to create custom AI agents. It’s available alongside a search engine called Compass that can sift through a company’s internal records for specific data points.

Aleph Alpha launched in 2019, the same year as Cohere. It develops custom AI models for organizations in highly regulated sectors such as finance and healthcare. It also helps users put those custom models to use. Aleph Alpha can develop evaluation frameworks that check whether a neural network works as expected, AI agents and other software tools.

Last year, the company detailed an internally developed model architecture called HAL. It’s an improved version of the mechanism that AI models use to split lengthy prompts into tokens. Aleph Alpha says that HAL makes neural networks models better at processing unexpected input such as text written in an unfamiliar language.

Many of Aleph Alpha’s customers are public sector organizations in the European Union. The startup pointed to those customer relationships as a major factor behind the merger with Cohere.

The combined company will develop a “customized AI” offering for highly regulated organizations. It plans to bring the product to market in collaboration with Schwarz Group, the lead backer of its upcoming Series E round. The retailer has a public cloud unit called Stackit that will sell the planned AI offering as a hosted service. 

“Combining the strengths of Cohere and Aleph Alpha accelerates our global expansion and advances our mission to deliver sovereign AI to nations around the world,” said Cohere co-founder and Chief Executive Officer Aidan Gomez.

Image: Cohere