Radical Ventures raising new $550 million USD fund as AI sector heats up

Radical managing partner believes “AI will eat all software over the next decade.”

Toronto-based Radical Ventures has launched another fund dedicated to artificial intelligence (AI) companies.

The early-stage, AI-focused venture capital (VC) firm is working to raise a new $550 million USD fund, as first reported by The New York Times and confirmed by BetaKit. Radical partner Aaron Brindle told BetaKit that a “significant majority” of the fund is already closed, but did not share a specific dollar amount.

The launch of Radical’s new fund comes as interest in AI has grown with the help of ChatGPT and DALL-E.

The launch of Radical’s new fund comes as interest in AI has been heating up. AI-powered chatbot ChatGPT and image generator DALL-E have gone viral, demonstrating the promise and peril of generative AI. VC interest in the sector has also picked up: ChatGPT creator OpenAI is reportedly in talks to raise funds at a $29 billion valuation.

“AI will eat all software over the next decade,” Radical co-founder and managing partner Jordan Jacobs told BetaKit. “We have been building companies and ecosystems and investing in the world’s leading AI founders since the inception of modern AI. Now the world is starting to realize just how massive the impact of AI will be.”

Founded in 2017 and led by Jacobs—co-founder of AI research hub Vector Institute and now-TD Bank-owned startup Layer 6—Radical invests primarily in companies that leverage AI.

Radical boasts a portfolio that includes many of Canada’s most notable and best-capitalized AI startups, from Toronto-based natural language processing firm Cohere to autonomous driving company Waabi, AI chip startup Untether AI, and quantum computing firm Xanadu.

Radical, which has finished making new investments out of its first institutional fund, secured the first close for its latest fund last summer.

RELATED: Radical Ventures expands leadership team, adds partner in San Francisco

In addition to launching this fund, Radical has recently expanded its leadership team with the addition of David Katz as a partner in Toronto, and Rob Toews as a partner on Radical’s investment team, alongside a few other personnel moves. Toews represents Radical’s first Bay Area-based investment partner.

The new fund marks Radical’s fourth to date, following a small seed fund, a $325 million USD first institutional fund, a $100 million Opportunity Fund for follow-on investments.

Brindle told BetaKit that the current close of the fund “reflects returning commitments from existing institutional investors” in Radical’s first institutional fund. Brindle said this group has returned alongside AI luminaries like Geoffrey Hinton and Fei-Fei Li.

LPs from Radical’s first institutional fund include Jacobs’ former employer, TD, Canada Pension Plan Investment Board, the Public Sector Pension Investment Board, and Wittington Investments.

With its latest fund, Radical plans to focus mainly on North American companies at the Series A stage, with some seed and Series B funding and investments in London and Tel Aviv.

RELATED: Cohere closes $125 million USD Series B led by Tiger Global

Radical has already begun investing out of the new fund, backing V7 out of the United Kingdom, New York-based Retrain and Hebbia, Pittsburgh’s EnrichedAg, and several other companies that are currently in stealth.

As for AI startup funding broadly, it represents one of the most heavily funded areas of tech, per Crunchbase News. In 2021, nearly $70 billion in VC funding went to AI startups globally, and in recent years, AI startup financing has accounted for as much as 10 percent of all global venture dollars invested, according to Crunchbase.

The growing popularity of tools like ChatGPT and DALL-E could see the AI space garner an even greater share of tech sector venture investment in 2023.

“In the last few months, text-to-image models, ChatGPT, and generative AI more broadly have taken the world by storm, making the power of AI more easily understood,” wrote Radical investor Sanjana Basu in a LinkedIn post announcing Radical’s new fund.

While popular interest in generative AI has grown recently, Radical has been focused on the space for some time now. According to Brindle, half of Radical’s existing investments have been in companies leveraging the underlying transformer-based AI technology that underpins generative AI advancements.

Feature image courtesy Radical Ventures. Photo of Jordan Jacobs.

0 replies on “Radical Ventures raising new $550 million USD fund as AI sector heats up”