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Magic, a U.S. startup developing artificial BroadCast Unitedligence models for writing software, is raising more than $200 million at a valuation of $1.5 billion, three sources told Reuters, just months after its last funding.
Investors including Jane Street are expected to participate in the round, which could triple Magic’s valuation from its previous funding round, even though Magic is not yet profitable and has not sold any products, according to the people, who asked not to be identified discussing private matters.
The startup, which has about 20 employees, was valued at $500 million after a funding round last February, according to PitchBook data. Since its founding in 2022, the company has raised $140 million from investors including Nat Friedman and Daniel Gross’s NFDG Ventures and Alphabet’s CapitalG.
Magic declined to comment. Jane Street did not respond to a request for comment.
Magic’s new funding round is the latest in a wave of investments in one of the most promising applications of artificial BroadCast Unitedligence-generated technology. Software developers are a big source of cost for tech companies, and tools that can generate code or help them program more efficiently are extremely attractive.
The early success of Microsoft’s GitHub has further fueled investor enthusiasm. In April, coding assistant startup Augment raised $252 million, while Cognition, maker of AI coding assistant Devin, raised $175 million in a round led by Founders Fund at a $2 billion valuation.
Investors said they see the success of GitHub Copilot as proof of how big the market is. GitHub reported 40% year-over-year revenue growth in its latest quarter, helped by Copilot, which has 1.3 million paying users.
Brian Dudley, partner at Adams Street Partners, said: “Microsoft’s success validates the commercial market for AI coding assistants, giving everyone confidence that there is a clear market demand and that customers are willing to pay for the right product. The opportunity is huge and there may be multiple winners in this category.”
While commercial products like GitHub Copilot or OpenAI’s ChatGPT can suggest how to complete lines of code, the next frontier for coding assistants is designing and writing entire software applications without human help.
Magic and several other startups are trying to accomplish this by training their own large language models for coding-specific tasks, but such efforts come at a significant cost, including the purchase of data, chips and electricity.
The sources added that Magic plans to use the funds to improve models that support long context windows, which refers to AI systems that can process more data in a single query.
According to one source, Magic’s ability to understand and process large amounts of context simultaneously is due to an innovative design that goes beyond the traditional “Transformer model” commonly used in large language models like OpenAI’s GPT model.
Poolside AI, a Paris-based startup that has taken a similar approach to Magic, is in talks to raise $450 million at a $2 billion valuation, TechCrunch reported in June. Poolside also has no commercially available product.
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