Google eyes strategic investment in AI startup Character.AI

Google is in discussions to make a substantial investment, amounting to hundreds of millions of dollars, in Character.AI. This artificial intelligence chatbot startup is seeking capital to train models and meet the increasing demand from users, according to a Reuters report.
The investment could be in the form of convertible notes, which would strengthen the existing relationship between Character.AI and Google. The startup uses Google’s cloud services and Tensor Processing Units (TPUs) to train its models.
The startup was founded by Noam Shazeer and Daniel De Freitas, who used to work at Google. Character.AI enables individuals to engage in conversations with virtual representations of celebrities such as Billie Eilish or anime characters. Users can also craft their own chatbots and AI assistants.
It offers a free service, but also has a subscription option that costs $9.99 a month for users who want to access a chatbot without waiting in line.
Character.AI’s chatbots, which have different personalities and styles, have attracted users aged 18 to 24, who make up about 60% of its website traffic, according to Similarweb data. The startup aims to provide more fun and personal AI companions than other chatbots from OpenAI’s ChatGPT and Google’s Bard.
The company said that its website had 100 million monthly visits in the first six months after its launch.
Character.AI is also seeking equity funding from venture capitalists, which could give the company a valuation of over $5 billion, sources said. In March, it raised $150 million in a round led by Andreessen Horowitz at a $1 billion valuation.
The sources said that the talks with Google were not final and the terms could change.
Google has been investing in AI startups, including $2 billion for model maker Anthropic in convertible notes, in addition to its previous equity investment. Anthropic uses Google’s cloud services and its latest TPUs.