Earlier today, Typeface raised $100 million at a $1 billion valuation, mere months after a $65 million round in February. It’s something to think about considering the company was founded in 2022. But even though we are once again seeing rapid-fire venture rounds at unicorn valuations, the investor list in Typeface’s round is worth noting.
Salesforce Ventures led the round. The CRM and cloud giant recently launched a $500 million fund to invest in generative AI startups, so its presence in this deal is not a complete shock, but the SaaS pioneer had company: Both Alphabet (through its GV investing arm) and Microsoft (through its M12 investing effort) invested in Typeface.
That’s a strange set of bedfellows: Salesforce and Microsoft have competing CRM products, and Microsoft and Alphabet compete in, to pick a few areas, search, productivity software, and public cloud infrastructure.
The Typeface cap table engenders a simple question: Where else are major corporate venture capital (CVC) investors putting their money to work?
To get a feel for the situation, I listed deals from a number of historically active CVC arms of major tech companies. Turns out, the Typeface round is funny for its internally competitive investor list, but it isn’t an outlier at all when it comes to Big Tech dollars flowing into startup accounts. The majors are busy these days.
Why the hurry?
Generative AI, previously an interesting research project, has unleashed a wave of competitive building, buying and investing at large tech companies. For example, Databricks and Snowflake are buying startups that flesh out their own generative AI stacks, showing that there is massive appetite for companies working in the problem space.
It’s good to ask why that’s happening. Investors, founders and a number of CEOs have told us that a huge number of industries expect generative AI technologies to positively impact their businesses by making workers more efficient, allowing their products and services to do more at lower costs, and perhaps replace certain categories of workers altogether. In short, generative AI is expected to make businesses more profitable and more nimble.
Every company wants to make more money, so every industry wants to use generative AI. That fact represents an opportunity and a risk for incumbent tech companies. The opportunity lies in their ability to leverage their customer relationships and the resultant large pools of data, and apply generative AI to their own business efforts. The risk is that some new startup will use new generative AI techniques to eat part of Big Tech’s lunch.
So, flush with cash, Big Tech companies are building and investing. A good way to get ahead of potential competition is to buy a big chunk of that business, as it gets you insight into its operations, the possibility of partnering with it, potential financial upside, as well as the option to just buy the startup if it makes sense or to stymie competitors.
If we’re right about this, we should see a lot of Big Tech companies investing in generative AI startups, right? Well, we are.
The following list is a bit broader than generative AI, encompassing some startups that are powered by AI or focused on it beyond just LLMs, but it’s a good illustration of what’s going on:
- M12: Microsoft’s venture capital fund invested in Typeface’s Series A and B rounds this year. It also took part in a Series A fundraise by Hazy, a synthetic data startup that has AI applications. Back in November 2022, M12 participated in a round for Private AI, and a round for Modl.ai, per Crunchbase data. Turning back the clock to October, we can add Insite AI to the list. In August last year, M12 put money into Inworld AI. And, of course, Microsoft has poured capital into OpenAI in recent years.
- GV: Besides the Typeface Series B and Series A rounds, Alphabet invested in Synthesia earlier this month, Lightmatter (chips for AI), Cognosys (AI agents), Moonhub (AI-powered recruiting) and Altana AI.
- Intel Capital: One of the most busy CVC groups, Intel’s venture arm recently invested in MatrixSpace (AI-enabled sensing tech) and Alkymi, though the last one focuses more on ML than AI.
- Salesforce Ventures: Apart from leading the latest Typeface deal, Salesforce has invested in Anthropic, the buzzy startup building models to compete with OpenAI. It recently also wrote checks for Simpplr (AI-powered employee experiences) and Cohere (access to LLMs via APIs) and invested in Hearth.AI, Faros AI and You.com.
- Baidu Ventures: The China-based CVC recently invested in Shengshu-AI, Xihu Xinchen and HeyGen, per Crunchbase data. Baidu is also building an AI-focused venture fund, similar to what Salesforce has been up to.
That list is not exhaustive, as some major tech companies invest in companies separately from their venture arms, and not every deal has been reported. Expect this roundup to get a lot longer by the end of the year, particularly if we add other names to the mix. For instance, Zoom Ventures has had some AI deals, with investments in UpdateAI, Anthropic and Prezent.ai, and Oracle has invested in Cohere and SentinelOne.
And Forbes reported this morning that Inflection AI has raised $1.3 billion in new funding. Who put the capital into the business? “LinkedIn co-founder Reid Hoffman, Microsoft cofounder Bill Gates and former Google CEO Eric Schmidt all personally invested, with Nvidia the sole new investor among the group,” Forbes writes. Yep.
Is there too much money flying around? Almost certainly. It feels like yesterday when we thought these trends — brand-new companies raising nine-figure rounds and startups raising capital more than once per year — were a feature of the bygone venture boom of 2021. Well, it’s all coming back!
So long as your founding team has an AI pedigree and a plan to sell lots of AI tech to big companies, you can expect a flood of cash from Big Tech funds and traditional venture investors alike.
