AI chatbot Character.AI, with no revenue, raises $150 million led by Andreessen Horowitz

By Krystal Hu and Anna Tong

(Reuters) – Character.AI has raised $150 million in a new funding round led by Andreessen Horowitz that valued the AI chatbot startup at $1 billion, and it’s in talks with cloud providers for more strategic investment, the company told Reuters.

The billion-dollar valuation for a company with zero revenue is another example of the continued AI funding boom since OpenAI’s ChatGPT became a widely recognized name. It came amid the recent shockwaves caused by the collapse of Silicon Valley Bank.

AI investment in 2023 to date has surpassed the full-year amount in 2020 of $1.5 billion, according to PitchBook data.

Character.AI will use the funding to train its self-built models and expand the 22-person team.

Since its launch six months ago, Character.AI, which enables users to create customized AI companions with specific personality and values, already has 100 million monthly site visits, the company said, marking a similar trajectory to ChatGPT, which set a record for the fastest-growing user base when it reached 100 million monthly users in two months.

Of the users who sent a message, their average time spent on the site is more than two hours a day, according to Character.AI.

The Menlo Park, Calif.-based company is launching a new model that adds more productivity capabilities, including drafting emails and assisting with test prep, on top of its current use cases such as entertainment, roleplay and emotional support.

“We started the company because we want to get this technology in the hands of everybody on Earth, A billion people can invent a billion use cases,” said Noam Shazeer, CEO at Character.AI.

While not currently generating any revenue, Character.AI plans to launch a paid subscription “in the not distant future”, while keeping the current free version available, Shazeer said. He didn’t rule out an ad-supported model.

Replika, another AI chatbot creator, charges $69.99 in annual fee for 250,000 paying subscribers. Founded in 2021 by former Google researchers Noam Shazeer and Daniel De Freitas, Character.AI had attracted backers including former GitHub CEO Nat Friedman.

(Reporting by Krystal Hu in New York and Anna Tong in San Francisco; Editing by Muralikumar Anantharaman)