Google in Advanced Talks for Significant Investment in Character.AI, an AI Chatbot Startup

• ByStartupStory     |    November 11, 2023

Google, a subsidiary of Alphabet Inc., is reportedly in advanced discussions to invest hundreds of millions of dollars in Character.AI, a rapidly growing artificial intelligence chatbot startup. Sources familiar with the matter revealed that Character.AI is seeking capital to train models and meet the rising demand from users. The potential investment, possibly structured as convertible notes, will further strengthen the existing partnership between Character.AI and Google.

Character.AI, founded by former Google employees Noam Shazeer and Daniel De Freitas, enables users to engage with virtual versions of celebrities like Billie Eilish or anime characters. Additionally, users can create their own chatbots and AI assistants. While the platform is free to use, it offers a subscription model at $9.99 per month, allowing users to bypass virtual queues for chatbot access.

The chatbot offerings from Character.AI, featuring various roles and tones, have resonated particularly well with users aged 18 to 24, contributing around 60% of the website’s traffic, according to Similarweb data. This demographic positioning has helped Character.AI distinguish itself as a provider of entertaining and personalized AI companions in contrast to other AI chatbots like OpenAI’s ChatGPT and Google’s Bard.

The startup, experiencing significant traction, reported 100 million monthly visits to its website within the first six months since its launch. In March, Character.AI raised $150 million in a funding round led by Andreessen Horowitz, achieving a valuation of $1 billion.

Beyond the potential investment from Google, Character.AI is also in talks with venture capital investors for additional equity funding. These discussions could value the company at over $5 billion, building on its prior valuation milestone.

The ongoing talks between Character.AI and Google emphasize the tech giant’s continued interest in investing in AI startups. Google has previously invested $2 billion in model maker Anthropic through convertible notes, supplementing its earlier equity investment. Anthropic utilizes Google’s cloud services and the latest Tensor Processing Units (TPUs).

This trend aligns with broader industry movements where major cloud service providers, such as Microsoft and Amazon, strike deals with AI companies to encourage their use of specific cloud infrastructure or hardware. The U.S. Federal Trade Commission has expressed interest in investigating such investments by cloud providers in AI startups to ensure competitive practices.

As discussions between Google and Character.AI progress, the terms of the deal remain subject to change. The potential investment signifies Google’s strategic commitment to advancements in AI technology and its collaboration with innovative startups in the field.

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