Bret Taylor’s Sierra raises nearly $1B in latest AI capital push

Artificial intelligence startup Sierra is raising nearly $1 billion in a new funding round, CNBC has learned, as investors scramble to find winners in the ongoing deal.

The San Francisco-based company brought in $950 million in new funding at a $15.8 million post-money deal, led by Tiger Global and Google’s GV. Benchmark, Sequoia, Greenoaks and other existing investors also participated.

The startup was founded three years ago by OpenAI’s chairman and predecessor Salesforce CEO Bret Taylor, and ex Google senior Clay Bavor. Taylor was also chief technology officer at Facebookand the chairman of Twitter when Elon Musk bought the social network. Sierra’s founders met at Google, where Taylor is widely credited with helping to create Google Maps and the virtual reality efforts led by Bavor and Google Labs.

Sierra sells AI customer service agents and positions itself as a leader in a new category of software companies built on foundational models from OpenAI and Anthropic. According to Taylor, the company uses “a bunch of models” in addition to its well-tuned proprietary layers.

Sierra has surpassed $150 million in annual recurring revenue, or ARR, in eight quarters, according to the company. This timeline of growth is unprecedented for traditional software and highlights “a huge demand in the market,” Taylor said.

“There’s a very large addressable market and an immediate opportunity,” Taylor said. “We’ve digitized the last remaining analog channel, which is the phone line – it’s a better job. You don’t have to wait. These agents are multilingual by nature.”

Taylor estimates that $400 billion is spent annually on customer service. A big part of that, he said, is moving to AI agents.

The funding round is the latest deal in what has been a hot spot for investors. Deals of this size have come to define the recent landscape of the business as investors flock to what they see as sector leaders. There’s also a desire to bring back names beyond behemoths like OpenAI and Anthropic, which have valuations rising to $1 trillion.

Taylor described active AI agent companies such as Cursor and Replit as the largest in the market, followed by customer service agents. The latest injection of capital is leading to an increasingly crowded area, he said.

“There’s a lot of competition. We’re also bigger than the next big guy and we’re trying to invest aggressively to continue to expand our lead,” Taylor said.

Sierra’s customers are mainly businesses Prudential, CignaBlue Cross Blue Shield and Rocket Mortgageand one of the three largest banks in the world. Startups serve more than 40 percent of the Fortune 50, Taylor said.

Peter Fenton, general partner at Benchmark, was one of Sierra’s first investors and participated in the Series E. He pointed to the startup’s revenue momentum and how long it took previous generations of software companies to hit those milestones.

“It’s crazy how fast it happened.” Fenton said in the interview. “Sierra is an all-time winner in the ‘customer experience’ category, when measured by objective facts like revenue scale and quality of customer base.”

Fenton said the size of this funding round should help Sierra continue to lead.

The startup has also been able to court traditional companies that aren’t always quick to innovate, according to Fenton.

“You’re seeing some industries that have historically been slow to accept that a wait-and-see approach to AI is the way to go.”

Taylor is at the center of the AI ​​boom as the chairman of OpenAI. He likens the current AI boom to the early days of the Internet, and says it will produce a new generation of trillion-dollar titans. However, he expects a market correction within the next two years.

“When there’s this hyper-excited reality in the market, you end up with too much money, too many companies,” Taylor said, predicting an “extermination effect” where economic capital dries up for all but the market leaders.

In Sierra, that means staying private for now. Taylor said an IPO is “definitely our future,” but he sees going private as a boon and a boon while dealing with the growing pains of rapid growth.