Hugging Face gets a $235M group hug led by Salesforce

A day after Salesforce CEO Marc Benioff jumped the gun with a post on X saying the company’s venture arm was “thrilled to lead” a new round of financing, Hugging Face has officially announced a $235 million equivalent of a group hug — the other participants in the round are Google, Amazon, Nvidia, Intel, AMD, Qualcomm, IBM and Sound Ventures — that will bring the AI startup’s valuation up to a frothy $4 billion.

Hugging Face CEO and cofounder Clement Delangue told VentureBeat that the funds will be used to grow the team (which currently stands at 170) and invest in open-source AI and collaboration platform building. Hugging Face, founded in 2016, had raised a total of $160 million prior to the new funding, with its last round a $100 million series C announced in 2022.

Hugging Face says investment has ‘no strings attached’

In a video interview, Delangue told VentureBeat he had never observed so many major cloud and hardware companies involved in one funding round, which he said made clear how broad support is for open-source AI and how central Hugging Face has become for the AI community — the company now has over a million repositories, up from 300,000 earlier this year. This includes 500,000 models, 250,000 datasets and 250,000 spaces.

Delangue also emphasized that the new funding round has “no strings attached, no commitment,” which he said was “really important to us.”

He added that Salesforce has been intensifying its open-source AI efforts over the past few months. “They’ve really been increasing their presence on Hugging Face,” he said. “Obviously for their enterprise customers AI is top of mind, so I think they want to really want to be more AI-focused.”

Salesforce no stranger to building and investing in AI

Salesforce is certainly no stranger to the AI space: In June, Salesforce Ventures announced that it was doubling its generative AI fund to $500 million, looking to grow its influence in the space. Also in June, Salesforce Ventures participated in the $270 million funding of Canadian generative AI startup Cohere.

Outside of Salesforce Ventures and its investing efforts, Salesforce has been pushing its own AI agenda in recent years. Prior to the generative AI boom, the company had built its own Einstein AI engine to help with predictive insights for its platform. 

Over the course of 2023, Salesforce has made a series of announcements about its embrace of the generative AI era, starting in March with the release of Einstein GPT. That was followed by announcements of a new AI cloud, the marketing GPT and Commerce GPT products, and earlier this month Einstein Studio for training AI models.

Hugging Face continues to grow with large partnerships

The new investment in Hugging Face comes at a particularly opportune time.

The company benefits from a large and growing community of users that is being increasingly bolstered with some big partnerships. 

IBM is among the many large enterprise vendors working with Hugging Face. In May, IBM announced that it is working with Hugging Face to bring open AI models to IBM’s enterprise users. That partnership also led to news earlier this month that IBM and NASA are working with Hugging Face to deploy open-source geospatial models to help deal with the challenges of climate change.

Enterprise IT operations platform vendor ServiceNow is also working closely with Hugging Face in a partnership to develop a generative AI coding tool called StarCoder, announced in May.

Continued AI investments from large enterprise vendors

AI startups have been gaining more interest from large enterprise vendors over the last several years.

“There is certainly room for multiple paths in this still nascent market and enterprises will seek the AI partners and technologies that they believe in and want to rally behind,” Futurom Group analyst Todd Weiss told VentureBeat. “And with that there will be reasons for tech companies to join other companies in backing Hugging Face, OpenAI or others.”

Weiss noted that he’s not surprised at all that Salesforce is investing in Hugging Face. After all, he noted, Microsoft has very publicly made three rounds of investments in OpenAI since 2019. In his view these investments make a lot of sense.

“This work in the world of AI is incredibly expensive and it makes sense that a startup like Hugging Face would be looking for more investment dollars,” Weiss said. “There are only going to be more companies like Salesforce that are looking to get more involved in this growing AI space, especially today as AI seems to only be increasing in demand. I don’t see this trend waning anytime soon.”

Still, Delangue emphasized that while the fund-raise is “good validation for open source AI,” Hugging Face hadn’t planned to raise money right now.

“We reached out yearly milestones just before summer, so twice [as fast as] we anticipated,” he said. “Plus opportunistically, just getting external interest led us to believe it was a good time to double down.”