Just a day after securing a hefty $500 million funding round at a valuation of £4.4 billion, generative AI startup Cohere has announced layoffs affecting approximately 20 employees, roughly 5% of its workforce.
The news highlights the challenges faced by the tech industry's rapid embrace of generative AI. While the sector sees significant investment and bullish projections, warning signs are also appearing.
In a letter to employees, Cohere CEO Aidan Gomez acknowledged the layoffs as a "necessary step" to ensure the company remains "highly competitive" and at the forefront of the industry. Gomez described the week as "mixed", with the successful funding round and an "exciting new roadmap" of models being overshadowed by the job cuts.
Despite the layoffs, Gomez affirmed the company's commitment to rapid hiring, aiming to double its headcount in 2024. However, he did not provide details regarding severance packages for affected employees, stating that the roles impacted varied and were not concentrated on any specific job type.
Toronto-based Cohere is a prominent player in the race to develop the most advanced large language models (LLMs), competing with giants like OpenAI, Google, Meta, Anthropic and Mistral. This race is fuelled by significant investment, with ScaleAI and Coreweave each securing £800 million in May, while Elon Musk-backed X.ai raised a staggering £4.8 billion that same month. French startup Mistral also raised £512 million in June.
Cohere's recent Series D funding round, led by Canadian pension fund PSP Investments with support from AMD, Cisco, and others, underscores the immense interest in AI development. However, the company faces pressure to prove the effectiveness of its models and go-to-market strategy for businesses, while simultaneously securing sufficient funding for its computing needs and delivering returns to investors.
The company's approach differs from its competitors. While some focus on consumer-facing chatbots or rely on partnerships with big tech companies, Cohere targets enterprise customers and prioritises financial independence from any single cloud ecosystem. They have partnered with Oracle, the fourth-largest cloud provider, but maintain their own distinct approach.
The cost of training LLMs is substantial, requiring constant funding. Despite these challenges, Cohere's commitment to its mission of scaling intelligence for humanity remains strong. Going forward, alongside its model-as-a-service business, Cohere aims to focus on integrating AI into the workforce and automating tasks.
Gomez concluded his letter by expressing his optimism about the company's future, emphasizing their position for success and the bright future ahead.
Note: Cohere announced its $500 million funding on Monday, not Tuesday, as previously reported.
