Character.AI, an artificial intelligence start-up founded by two former Google employees says it has raised $150 million at a $1 billion valuation, as it looks to compete with OpenAI, the company behind ChatGPT.

Character.AI, based in Palo Alto, California, was founded in 2021 by Noam Shazeer and Daniel De Freitas, who led a team that built a technology called LaMDA (Language Model for Dialogue Applications at Google), a kind of artificial intelligence that drives online chatbots like ChatGPT, but left to develop their own AI product.

In September of last year, the AI company unveiled an initial version of its software, providing users with the ability to generate and interact with chatbots that simulate well-known figures such as Vladimir Putin or Elon Musk. As of now, the website boasts a whopping 100 million monthly visitors.

The financing round comes amid the recent spike in investments by big tech companies and VCs into the AI technology market following the media buzz generated around OpenAI's ChatGPT after its release last November.

Big tech companies like Google and Microsoft have since made efforts to develop or embed chatbot software into key products, bringing AI-generated responses into things like search, documents and email.

Character.AI said the fresh capital will allow it to expand its “compute abilities resulting in a more sophisticated model with advanced reasoning and greater accuracy.” and grow its 22-person team.

The funding round was spearheaded by Andreessen Horowitz, a prominent venture capital firm based in Silicon Valley. The round also witnessed other notable investors including former GitHub CEO Nat Friedman, Elad Gil, A Capital and SV Angel.