For the first time in a while, an Israeli company has completed a huge financing round. On Wednesday night, Israeli generative AI startup AI21 Labs, founded by chairman Prof. Amnon Shasuha, and co-CEOs Prof. Yoav Shoham, and Ori Goshen, announced it had raised $155 million at a company valuation of $1.4 billion, doubling its most recent valuation of $664 million. AI121 is the only company in Israel developing a "large language model" based on AI, which can understand and generate text that approaches human quality.
Two AI giants - Google and Nvidia - participated in the financing round. Nvidia CEO Jensen Huang said, "The innovative work by the AI21 Labs team will help enterprises accelerate productivity and efficiency with generative AI-based systems."
AI21 Labs is mainly known as the company that has developed Wordtune, the application that improves writing and allows individual users to improve their text composition in English.
In an exclusive interview with "Globes," AI21 Labs chairman Prof. Amnon Shashua reveals the company's strategy and spoke about the huge financing round. "The company is known for producing the Wordtune application and helps people write business or creative text. It is suited for individual users and not enterprises," Shashua explains. "We have set up a division called AI OS studio an AI operating system, which will adapt the technology for the needs of enterprises. Think of a virtual user in corporate communications applications like Slack, which serves as your corporate assistant. It needs to understand complex requests and special instructions, and be able to access different sources of information and connect useful data from them and produce outputs. The language model is a component of all of this."
He continues, "There are no few companies around us that knbow how to build models like this, like OpenAI, Cohere and Entropik but this financing round is designed to make us one of the leading players in the field of AI."
"A bubble that will burst? We are not in 2021"
Following the proliferation of funds raised in the field, with billions of dollars raised by dozens of companies, investors report a high valuation for companies compared with other markets. Some are already starting to call this growing trend the "artificial intelligence bubble." According to the tech news site "The Information", AI21 Labs revenue last year was $20 million and this year it is forecast to jump to $50 million, which indicates the company has a multiple of almost 30 times on revenue.
Prof. Shashua does not see anything resembling a bubble in the conduct of AI21 Labs or the industry. "I think this financing round means something. Based on the value of the company, you can see that this is not a 2021 fundraising with a crazy valuation, where you don't know if it holds water. With all the macroeconomic circumstances, inflation, along with the Israeli environment and instability, fundraising at a $1.4 billion valuation provides a fair valuation of the company."
How difficult was it to raise this amount during a period of global and domestic decline in investment?
"Instability certainly influences but the sector in which we are operating is 'hot' and the company that we are managing is very special. The combination of these two elements solved the aforementioned problems. But if we look down from 30,000 feet for a moment, we can see that a good investment climate is not necessary for strong companies, which will manage. Mobileye will be fine, Checkpoint will be fine, and so will AI21. It is clear that a bad climate hurts, but it hurts the volume, the volume of the industry and not the strong. That's why we managed to raise the money, despite the challenging reality."
How challenging was the fund raising situation?
"While there is instability, I think it will be a slippery slope that will be detrimental for the Israeli economy. When we achieve stability, I guess the industry will thrive. We must get there, but the instability does not harm Mobileye, nor our fund raising."
"Not dependent on one supplier. We will enjoy all worlds"
Unlike rivals such as OpenAI and Cohere, Shashua, Shoham and Goshen's company has chosen not to take sides in the industry. OpenAI has thrown its lot in with Microsoft and Cohere has become a partner of Oracle, while the Israeli company treads a fine line between the tech giants. Amazon announced that it would distribute its model for AI customers. Google also recently announced that it would collaborate with AI21 Labs in the field of databases. "We chose not to work with one company and we are striving to work with as many players as possible in the industry," explains Shashua. "Why be dependent on one supplier? We are enjoying all worlds and raising money from several players in the field to control our own destiny."
Meanwhile, your rivals have expanded to others area like video, software code, images and music. You in contrast have stuck to the worlds of text.
"Large language model deals not only with text but is also the source of data that might help you undertake tasks: to read tables, to understand what is in images, to correctly read graphs, charts and drawings. Put all of these into the toolbox of an organizational assistant, and we'll be there."
The AI industry is not without criticism
Rival OpenAI's ChatGPT has received criticism because it has imposed few restrictions on itself in the use of data generated by users and organizations. For many organizations this is a blatant violation of intellectual property and privacy rules. "AI21 set for itself the issue of data security as a guiding and important issue from the start," stresses Shashua. "Recently, we started cooperating with Bank One Zero, and one of the reasons why the bank chose us is the high level of security." Even though Shashua is one of the early investors in the bank, he insists that the selection was made objectively and without his intervention.
He continues, "We were able to significantly reduce the number of 'hallucinations' (false information presented by the speech engine as if it were authentic information). This is a phenomenon that other companies have not been able to completely eliminate, but we have found our own methods to reduce their appearance by creative solutions, such as by referring the algorithm to external repositories for the language model. If, for example, I ask the GPT engine about the lectures I have given at academic institutions, the answers will not be in-depth enough. However, if it knew that it could turn to my lecture database specifically for this purpose, its success rate in providing answers would be higher."
"AI21 is the Mobileye of AI"
Currently the largest language models competing with you like Cohere, Entropik and OpenAI have raised hundreds of millions of dollars - some of them even billions. It seems that the money has reached many places but not Israel. Have we missed the AI revolution?
"That's like saying at the time that Mobileye, at its inception in Israel, had missed the automotive revolution. But that's not what ultimately happened: Mobileye grew, followed by many auto-tech companies. AI21 is the Mobileye of AI, and you will see that following its success, many more companies will be established here in this field."
We will see smaller companies on the periphery of the AI sector, creating specific solutions but we have missed the field of large language models where the big money is.
"You don't need a lot of companies building language models, it's just one component of the AI industry and it shouldn't be over-duplicated. There will be many more companies completing this ecosystem. Language models have a glass ceiling. They can help with different tasks that we need to do, but it will not be able to solve humanity's problems. Can AI imitate the qualities of a great mathematician or physicist? Can it invent the theory of relativity or develop the differential calculus as a tool to develop laws like those of Newton? It is a matter of abstraction that smart people know how to do and language models have not been trained for this. This is the next stage of AI. "Imagine creatures that land in a spaceship on Earth with an altruistic idea of only coming to help humans, and no intention of taking us over. What would you do with them? Ask them big questions about sustainability, about developing medicines and curing diseases, and they would be able to solve them because it is an advanced culture. These are capabilities that language models currently do not have."
What can the government do so that more companies will be founded here in the field of AI?
"We need technological education for tools in the field from elementary school level. We need government funds of NIS 100 or 200 million per year to encourage high-tech companies to buy AI services in the cloud."
Published by Globes, Israel business news - en.globes.co.il - on September 1, 2023.
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