Artificial intelligence startup AI21 Labs raises $155M at $1.4B

Walden Catalyst, Pitango, SCB10X, b2venture, Samsung Next, and Intel-owned Mobileye founder Amnon Shashua led a $155 million Series C funding round for Tel Aviv-based AI21 Labs, which develops text-generating AI tools. Google and Nvidia joined.

AI21 Labs’ total raised $283 million values the company at $1.4 billion, up from The Information’s $1.2 billion earlier today.

“AI21 Labs came out of stealth in October 2020 with our first launch of [AI writing tool] Wordtune,” co-CEO Yoav Shoham emailed . Since then, we’ve grown, more than doubling our workforce and planning to add more.”

Shashua, Shoham, and co-CEO Ori Goshen founded AI21 Labs in 2017. Stanford professor emeritus Shoham sold Timeful and Katango to Google. Serial entrepreneur Goshen co-founded and led several Israeli tech companies, including Crowdx, telco analytics.

AI21 Studio, a pay-as-you-go developer platform for building custom text-based business apps using AI21’s proprietary text-generating AI models, including Jurassic-2, is the company’s flagship product. Wordtune, a multilingual reading and writing AI assistant like Grammarly, is also sold by the startup.

APIs allow customers to use AI21 Labs’ platform for summarization, paraphrasing, grammar, and spelling correction. The startup’s models now support Spanish, German, Italian, and Dutch.

AI21 Labs faces growing competition from generative AI startups and incumbents.

Google, AWS, Microsoft, Cohere, OpenAI, and Anthropic, as well as marketing-focused vendors like Jasper, Regie, and Typeface, offer AI21 Studio-like tools. The funding gap between AI21 Labs and OpenAI is $11.3 billion, while Anthropic and Cohere have raised $1.6 billion and $435 million, respectively.

Shoham claims that AI21 Labs’ solutions are better in several ways despite looking similar and lacking a larger R&D budget.

Shoham says they use “some of the world’s largest and most sophisticated large language models” and offer “more refined control” than many generative AI apps. They’re also trained on current data, unlike text-generating models that can’t answer current event questions.

“The AI21’s AI systems are easy to integrate and produce trustworthy, accurate results,” Shoham said. “The industry struggles with training data quality and quantity. We constantly train our models on new data and work to ensure that our data is reliable and trustworthy.”

I haven’t tested AI21 Labs’ products recently, so I can’t verify those claims. Despite its flaws, AI21 Labs appears to be gaining traction.

Wordtune has over 10 million users, according to Shoham, who said AI21 Labs has “several” Fortune 100 customers. Bedrock, Amazon’s generative AI app development platform, launched with AI21 Labs.

Shoham says the latest funding will help AI21 Labs “reach its goal of developing the next level of AI,” with “the capabilities of reasoning across many domains.” AI21 Labs plans to expand its 200-person workforce and partner with companies “across the entire tech ecosystem” to focus on research and business development.

AI21 Labs recently hired former Google and Databricks executive Pankaj Dugar as its SVP of go-to-market and GM of North America.

Given the capital requirements of developing large language models, it will need money.

The Information reports that OpenAI spent $540 million on ChatGPT last year. According to AI21 Labs, training a text-generating model with 1.5 billion parameters (variables used to generate and analyze text) costs $1.6 million. Jurassic-1, like AI21 Labs’ Jurassic-2 model, had 178 billion parameters.

That doesn’t include model hosting costs.

OpenAI reportedly paid $700,000 a day to maintain ChatGPT’s infrastructure. According to rough calculations, running a model like GPT-3, an older OpenAI model, on AWS costs $87,000 per year.

The fact that AWS partners with AI21 Labs raises questions about volume discounting. I think it’s not insignificant overhead.

Shoham said, “We’ve focused on growing responsibly, allowing us to continue to grow and expand, bringing our customers the most up-to-date, trustworthy AI possible.”