AI Company With Zero Revenue Raises $150 Million

It's a gold rush!

Profit, Shmofit

With the help of a brand new $150 million dollar cash infusion from Andreessen Horowitz, a 16-month-old AI chatbot startup called Character.ai just reached a $1 billion market cap — despite having yet to generate any revenue.

Founded by two ex-Googlers, the idea is to host various AI-powered personalities, from celebrities to anime characters to Twitch streams to historical figures and more, all of whom users can interact with via text. Wanna ask AI Taylor Swift what her favorite song is? Albert Einstein what his greatest accomplishment was? Go for it, kid.

But giving users the means to "chat" with algorithmic celebs doesn't really appear to be Character.ai's billion-dollar get. Rather, the app is marketed as an alternative to Replika — yes, that Replika — by providing users with a space to build and chat with customizable, AI-powered companions.

"Character.ai's power is our highly-sophisticated language model, which rapidly analyzes and contextualizes large volumes of information to produce useful intelligence tailored to each individual," company CEO Noam Shazeer said in a press release, "making it a personalized superintelligence companion that enhances productivity, offers advice, educates, and entertains."

"The potential use cases," he added, "are infinite."

Lessons Learned

"Superintelligence" feels like a marketing stretch, but we digress. You heard 'em, folks — personalized, pocket-sized AI Tamagatchis for all!

Replika became fairly successful, so it's not the most out-there thing in the world to see the extremely AI-optimistic folks at the Andreessen Horowitz firm put some cash into Character.ai.

Still, Replika has dealt with some pretty serious issues, on the tech side as well as on the side of its users. After discovering that in a number of cases, users were verbally and sexually harassing the AI programs and vice versa, the sexual component of the app — an expected function of AI like this, whether explicitly offered by the company or not — was shut down.

So, you know, learning lessons.

As far as the profit piece goes, the makers of the app — which is currently free — did tell Reuters that they plan to soon launch a subscription model as a secondary option to the free version. They're also reportedly considering an ad model.

But if the last few months in Silicon Valley have demonstrated anything, it's that you can just whisper the word AI into the wind and rake in millions. Who needs to sell to consumers, when at least for the time being, you can just sell to VCs?

READ MORE: A 16-Month-Old Chatbot Startup With No Revenue Is Now a $1 Billion Unicorn [The Washington Post]