AI Valuations May Be Coming Down to Earth; A Glimpse of OpenAI’s Search Engine

The valuations of artificial intelligence startups, as a multiple of their projected future revenue, may be coming down from their peaks.

Three months ago, we calculated such valuation multiples for eight prominent companies that sell consumer or enterprise services tied to large language models. On average, investors valued these companies at 83 times their projected sales—usually calculated as annualized revenue, or 12 times their monthly revenue at the time of the investment. 

In comparison, three of the four AI startups that have raised money since then have done so at half of the revenue multiple of the original eight, on average. (The exception is Canada-based Cohere, which we’ll get to later). To be sure, this decline is likely to be partly due to the growth of the businesses. As young startups start to generate revenue, their forward sales multiple typically falls from the sky-high numbers of their early days when they generated little money. (Public software companies, are, on average, trading at seven times their forward revenue, according to Meritech Capital.)