A UK-based artificial intelligence startup founded by former Google DeepMind researchers and registered just last month is nearing a new funding round of up to $700 million, valuing the company at $3.7 billion post-investment. The round is being co-led by UK-based Index Ventures and US-based Lightspeed Venture Partners.

Emulate, incorporated in August, was founded by Jack Parker-Holder, Matthew McGill, and Philip Ball. The trio previously worked at Google DeepMind on the creation of the Genie world model, which generates realistic videos and interactive 3D environments from brief prompts. Since its release in January, Genie has shaken the video game industry.

World models represent a new frontier in AI research, with a competitive landscape less crowded than the large language models underpinning products like ChatGPT, Gemini, and Claude. This funding arrives just weeks after Google DeepMind co-founder Demis Hassabis stepped down as CEO to become chairman. Hassabis has been considered a key figure in building Google's London-based AI research capabilities since DeepMind was acquired by Google in 2014.

This year, "new labs" led by former researchers from major AI companies have attracted billions in funding. Such startups often achieve high valuations based on founder reputation before any product is launched. Last month, Google Chief Scientist Jeff Dean announced his departure to establish US-based AI startup Discovery Loop.

Emulate is the third new UK lab to spin out of DeepMind's London office this year, each securing hundreds of millions in funding, underscoring sustained venture capital interest in top AI research talent. Earlier, former DeepMind researcher David Silver raised roughly $1 billion for his startup Ineffable Intelligence at a $5 billion valuation, and a team of ex-DeepMind and OpenAI engineers raised over $600 million for Recursive Superintelligence at a $4 billion valuation.

The two largest costs for such companies are financing the compute power needed to develop AI models and recruiting top researchers in a competitive market. Index Ventures, Lightspeed Venture Partners, and Emulate all declined to comment.