Link: Sources: Character.AI has recently discussed a sale with potential buyers and also talked with investors about raising a few hundred million at a $1B+ valuation (The Information)

Character.AI, a chatbot startup, is exploring a potential sale while also considering raising significant funds independently. The company's leaders have engaged with bankers and investors to either sell or secure hundreds of millions in investments, aiming for a valuation of over $1 billion.

The startup, which has grown to 70 employees, is grappling with increased operational costs and legal challenges. Despite these issues, the business has expanded to 20 million monthly users and is innovating with new features like a social feed and advertising.

Founded nearly four years ago, Character's significant traction includes 20 million monthly users and projected annual revenues of $50 million by year-end. Their current revenue model primarily relies on a subscription fee for enhanced chatbot interactions.

After its founders left for Google, Character shifted to using open-source AI models to maintain its services, which reduced costs but still requires substantial monthly expenses. The company now pays millions monthly to run these models, which impacts its financial health.

A change in leadership saw Karandeep Anand becoming CEO, aiming to steer Character through its current challenges and opportunities. The company has introduced advertising and user collaboration features to diversify revenue and engage users further.

A potential sale could include valuable assets like Character’s website, app, and consumer behavior data. This data, along with regular income from subscriptions, might be highly attractive to buyers, especially those looking to integrate or expand within the AI sector.

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