(Reuters) - Sierra, a software startup co-founded by former Salesforce co-CEO Bret Taylor, has raised $175 million in a new funding round led by Greenoaks Capital that gave it a $4.5 billion valuation, the company said on Monday.

The funding round comes less than a year after the public launch of the young AI startup by Taylor, one of the most closely watched entrepreneurs in Silicon Valley.

The company previously raised $110 million from Sequoia Capital and Benchmark at a nearly $1 billion valuation.

Thrive Capital and Iconiq also participated in the round.

The funding has established Sierra as one of the most highly valued AI startups, despite growing concerns around AI bubbles. The company has crossed $20 million in annualized revenue, sources familiar with the matter told Reuters.

A huge valuation at an early-stage startup is usually based on the company's growth potential and investor's interest in the category and founding team.

The major jump in valuation signals appetite to pay high multiples to back AI companies by established founders. The Information earlier reported on the funding talks.

One-year-old Sierra focuses on selling artificial intelligence-powered customer service chatbots to enterprises. It serves clients such as WeightWatchers and Sirius XM.

Since OpenAI's ChatGPT burst on to the scene, investors' interest in funding the technology has gradually shifted from funding expensive foundational models into applications selling to enterprises that generate steady revenue.

Founded by Taylor and longtime Google executive Clay Bavor, Sierra AI enters a crowded space of AI-powered customer service solutions, which includes giants like Salesforce and startups like Forethought.

Sierra says it differentiated itself by reducing "hallucinations", a common issue in which large language models generate false information, so brands can trust the AI agent to interact with customers.

Sierra is the latest venture by Taylor, who gained prominence in Silicon Valley through his leadership roles at Salesforce. He also serves as chairman of the board at OpenAI, and has previously downplayed the competition between OpenAI, which aims to build artificial intelligence, and Sierra.

Taylor, who oversaw the Twitter board throughout the high-profile takeover by Elon Musk, was previously seen as a likely successor to Salesforce CEO Marc Benioff before announcing his departure to return to entrepreneurial ventures.

His co-founder Clay Bavor joined Google in 2005 and held significant roles, including managing Gmail and Google Drive.

(Reporting by Krystal Hu in New York, with Kenrick Cai and Anna Tong in San Francisco; Editing by David Holmes)