Runway, an AI Video Startup, in Talks With General Atlantic for $4 Billion–Valuation Fundraise
The Takeaway
• Runway in talks to raise $450 million
• Investment would deepen funding lead on other AI video startups
• New York startup faces heightened rivalry with OpenAI, Google’s Veo
Runway, already the best funded among a cluster of startups developing artificial intelligence software to generate videos for Hollywood and more amateur filmmakers, is trying to strengthen that lead with a new round of financing.
The firm is in talks with investors to raise $450 million at about a $4 billion valuation, according to a person involved in the deal and a person who spoke with Runway executives. General Atlantic, a New York private equity and growth-stage investor, is in talks to lead the round, said the person involved in the deal.
Runway has previously raised more than $230 million and was most recently valued at $1.5 billion in June 2023. It wasn’t clear if the new $4 billion valuation that Runway is targeting includes the new capital. Spokespeople for the company and General Atlantic declined to comment.
The potential fundraise, which would nearly triple the amount of capital Runway has raised, reflects growing investor excitement about AI’s potential to revolutionize the entertainment industry.
Runway sells subscriptions that grant a specified number of credits per month to users of its software, which produces images and movies from text prompts. It was generating around $25 million in annual recurring revenue at the end of last year, said the person involved in the deal. That’s up from the several million dollars a year it was making six months prior, The Information previously reported. It’s still a far cry from the billions in revenue older AI firms like OpenAI are generating, though.
Runway’s revenue rate also makes the deal relatively expensive, even among typically high-priced AI deals. The $4 billion valuation implies that investors value the startup at about 160 times its end-of-2023 ARR, or the subscription revenue it expected to make over the next 12 months.
Such a multiple is significantly higher than those of other in-demand AI startups, which have been raising at 50 to 100 times their forward revenue in recent months. (Usually investors price startup investments based on future revenue, a figure that couldn’t be learned for Runway.)
The New York–based startup, founded in 2018 by three New York University graduates, is facing increasing competition from venture capital–backed upstarts like Pika, Genmo and Luma AI, as well as from OpenAI itself. Earlier this year, the ChatGPT maker announced its video-generation model Sora to much fanfare, and it has reportedly been in talks with Hollywood studios, though it has yet to make the software publicly available. Google also offers a video-generation model called Veo.
The 86-person Runway has tried to stand out by positioning itself mainly as a tool for businesses and professionals rather than as a consumer app. The recent funding discussions follow the release of Gen-3 Alpha, its latest video-generating model, which Runway says is easier for users to control and faster than previous versions. Runway has tried to ease filmmakers’ concerns that AI will eliminate jobs by hosting in-person festivals for films made using its AI.
Runway in June 2023 raised $141 million from investors including Google, Nvidia and Salesforce Ventures. General Atlantic has previously backed tech companies including ByteDance, Alibaba and Facebook.