Jasper, an Early Generative AI Winner, Cuts Internal Valuation as Growth Slows
Jasper AI, an early darling of the generative artificial intelligence boom, has cut the internal value of its common shares 20%, according to former employees who were notified by the company.
The drop in Jasper’s internal valuation could indicate that the growth of its AI-powered writing tool for marketers has slowed since the company raised venture funding at a $1.5 billion valuation in June. Jasper has long relied on OpenAI’s technology to power its product, but last fall OpenAI launched ChatGPT, which has effectively turned into a direct competitor.
THE TAKEAWAY
• Jasper’s writing software competes with OpenAI’s ChatGPT
• Startup cut revenue targets early this year
• Co-founder Dave Rogenmoser stepped down as CEO
A representative for Jasper did not respond to requests for comment.
As of January, Jasper told some investors it was generating $90 million in annual recurring revenue, a measure of the subscription sales it expected to generate in the following 12 months, according to a person familiar with its financials. In February, it said it could reach $140 million in ARR by the end of this year and $250 million by the end of 2024.
This summer, however, it told staff it had cut 2023 ARR projections by at least 30%, according to two people familiar with the discussion. In July, it laid off staff.
By lowering the internal share price, known as a 409A valuation, the company is reducing the value of employees’ stock, which it uses to set the price for their equity awards. This price usually differs from the one set by investors for preferred stock purchased in private funding rounds. Still, the internal valuations set by companies such as Instacart over the last year gave an indication of how future investors ultimately valued the company.
In Jasper’s case, the company has told people holding equity compensation awards that the new value of their shares is about $3.34, down from more than $4.20 previously. That 20% drop indicates Jasper’s overall paper valuation could be $1.2 billion. In the meantime, the valuations of other AI startups have continued to rise.
On Thursday, the Austin, Texas, startup announced that its CEO and co-founder, Dave Rogenmoser, was stepping down from his role. Former Dropbox president Timothy Young replaced him.
Jasper burst into public view last year thanks in part to OpenAI’s software, which powers its product. Clients such as Airbnb and HarperCollins paid for the Jasper software, which creates blog posts and other copy based on text descriptions of what customers want to see. With three-quarters of its customers paying $80 a month for the service, Jasper’s recurring revenue swelled to $80 million by the end of last year, more than double its ARR at the end of 2021.
Investors rushed to pour money into the startup. Jasper sold shares to investors at increasingly high prices last year, ultimately raising $125 million from Insight Partners, Coatue Management and Bessemer Venture Partners in a round that valued it at $1.5 billion. As the ink dried on that deal, which was announced in November, Jasper started to reel from the impact of a new, less expensive competitor: OpenAI’s ChatGPT.
In July, Jasper's head of product and some other leaders left. At the time, Rogenmoser said Jasper would transition to a business focused on selling to marketing teams at midsize and enterprise startups, rather than a mix of consumers and businesses.