Alphabet’s A.I. frenzy hits startup scene as CapitalG unit leads $100 million investment in AlphaSense
Alphabet’s late-stage venture capital arm, CapitalG, told CNBC that it just led a $100 million investment in corporate data firm AlphaSense, valuing the company at $1.8 billion. AlphaSense competes with companies like FactSet and Bloomberg in providing data on businesses that can help inform corporate and investment strategies.
The funding round, announced Tuesday, follows months of increased hype surrounding generative AI, particularly OpenAI’s ChatGPT and other text-generating tools that use large language models, or LLMs, to provide creative and sophisticated answers to user queries. In February, Google introduced a conversational technology called Bard, which will integrate with the company’s dominant search engine and other products.
AlphaSense CEO Jack Kokko said AlphaSense is working on a product feature that will automatically summarize financial documents for customers so they can more easily glean key points. Summarization has long been a challenging task for AI software, but has gotten significantly better with the help of LLMs.
Kokko founded AlphaSense in 2011. The latest financing is a flat round following a $225 million investment in June that was led by Goldman Sachs and Viking Global Investors. In that round, the valuation doubled from a 2021 financing that was led by the same investors.
Generative AI wasn’t a talking point in the prior two rounds because the term hadn’t yet jumped into the popular lexicon. In its press release last year, AlphaSense said its platform uses “proprietary search technology” powered by AI and natural language processing to “extract relevant insights from an extensive universe of public and private content.”
Since late 2021, tech funding has dried up alongside a plunge in public company valuations and a freezing of the IPO market. Generative AI has been the one bright spot this year, turning rather frothy in some corners. In March, a 2-year-old pre-revenue startup called Character.AI, which was founded by two former Google employees, raised $150 million at a $1 billion valuation, in a round led by Andreessen Horowitz.
AlphaSense is much further along, having already surpassed $100 million in annual recurring revenue in 2022. Kokko said the fresh capital will go toward hiring additional salespeople as the company prepares to go public when the economy stabilizes. He said the money will also help AlphaSense improve its technology, taking advantage of advances in generative AI.
James Luo, a CapitalG partner, said part of the appeal of AlphaSense using newer LLMs is that it can make the core product more appealing to customers outside of traditional financial services. Salespeople, for instance, could be drawn to using a product like AlphaSense if the interface was more intuitive.
“These are the people who are using Google Search to try to find every piece of information but they don’t have access to a lot of proprietary content,” Luo said of potential new users. “If you don’t work in that world, you need something that makes it a lot easier for you to understand that information.”
Still, modern-day LLMs suffer from a phenomenon that AI researchers call “hallucination,” referring to the tendency for the software to generate inaccurate responses.
Kokko said AlphaSense is working on techniques to ensure that its technology creates accurate summaries with footnotes to documents so that people know the sources of the information. He declined to identify the specific LLMs that AlphaSense plans to incorporate, but he said the company is testing nearly every major model that’s currently available. Tech companies including Alphabet and Meta as well as startups like OpenAI and Cohere have developed LLMs.
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