Character.AI in Talks to Raise Funding as Meta Platforms Tests Rival
haracter.AI, which lets users create artificial intelligence–powered chatbots modeled after figures like TV character Tony Soprano and Tesla CEO Elon Musk, is in talks with investors about raising an additional round of funding, according to a person with direct knowledge. The discussions come just four months after Character.AI said it had raised $150 million at a $1 billion valuation.
New capital could help the 20-month-old startup support skyrocketing demand for its chatbots, which rely on computing-intensive models to deliver responses. At the same time, the 30-person startup is facing pressure to keep millions of users engaged, especially as larger tech companies nip at its heels. Meta Platforms, for instance, has been testing a Character.AI-like product that enables people to chat with avatars who assume different personas, such as Abraham Lincoln, according to a person with direct knowledge of the product.
THE TAKEAWAY
• Character.AI in talks with investors four months after unveiling last round
• It’s shouldering rising costs from powering chatbot interactions
• Meta has been testing a chatbot
The Facebook and Instagram parent has also built a programming assistant that can write code as well as a workplace productivity chatbot called Metamate that can help employees search for internal data, according to the person. Meta CEO Mark Zuckerberg told employees at an all-hands meeting in June that it planned to use the AI agents initially in Meta’s Messenger and WhatsApp messaging apps, according to Axios.
A spokesperson for Meta declined to comment.
Character.AI, founded by two ex-Google researchers, doesn’t necessarily need the money immediately. But the capital could provide a cushion as it tries to generate revenue by charging for perks, such as faster chatbot responses, with a $9.99 monthly subscription. As registered users have swelled to 15 million since its September launch, the startup has struggled to keep its site running smoothly, and there’s often a wait time to log in.
Back-to-back funding rounds such as the one Character.AI is considering were a hallmark of the pandemic-era funding boom. But those repeat investments died out after tech stocks crashed last year. In the last several months, advances in technology that can replicate humanlike text and images have rekindled appetite from venture capitalists, as well as tech companies like Google, Microsoft and Nvidia that provide computing and AI server chips and want to knit relationships with the promising startups.
“There’s a lot of inbound coming in, but they’re certainly not pressured to raise in the near term, even if they don’t monetize in the near term,” Sarah Wang, an Andreessen Horowitz general partner who sits on Character.AI’s board, said in a June interview.