Character.ai is in talks to raise around $200 million in a deal backed by Google, sources say

AI startup Character.ai is in talks to raise around $200 million in a round backed by Google, Business Insider understands.

The San Francisco-based startup, which was founded in 2021, allows users to create AI-generated characters in the form of chatbots. 

Reuters first reported that the startup was in talks with Google to raise “hundreds of millions of dollars” in November 2023. The round is set to be near the $200 million mark, three sources familiar with the matter told BI.

The deal is not yet finalized, and details around the round size and participants could still change. Sources spoke to BI on condition of anonymity as details of the deal are still private.

“We’re excited about our continued work and the growth of our platform, but any speculation about our fundraising or valuation is just that,” the company said in a statement to BI.

Character.ai uses neural language models — models that analyze patterns in human language in order to predict the order of certain words and phrases — to create responses to user prompts. 

Users can create characters based on real and fictional entities and talk to one another using these chatbots. Character.ai’s platform gained traction amongst users aged 18 to 24 in the US — touting 4.2 million active users in the region, TechCrunch previously reported. 

While ChatGPT — its main competitor — is a long way ahead with around 22 million active monthly users, Character.ai has proven to appeal to a Gen Z demographic, which made up only 27% of ChatGPT’s traffic base in late 2023, per TechCrunch. 

The startup has also launched a paid version of its product, c.ai+, for $10 a month.

In May 2023, Character.ai announced a $150 million Series A led by Andreessen Horowitz, with backing from GitHub CEO Nat Friedman and Elad Gil. The round valued the startup at around $1 billion. 

Google has been a frontrunner in investing in AI juggernauts; it recently backed OpenAI rival Anthropic in a $2 billion round, and previously backed generative AI upstart Runway. Character.ai already uses Google’s cloud services, Reuters reported.

Amid a sullied tech market, investor appetite for AI startups has remained strong. In December, Paris-based startup Mistral announced a $415 million raise from a16z, while OpenAI is in talks to finalize a deal that would value the company at $80 billion, per the New York Times.