17 October, 2024
Exclusive: Black Forest Labs, the company that powers Grok's image generation, is raising another $100M on a $1B valuation, say sources
While OpenAI pursues yet another monster fundraise, it is not stealing all the oxygen in the room: AI startups building promising foundational models can still open doors, and checkbooks. Multiple sources tell us that Black Forest Labs — a startup that’s building generative AI image models and came out of stealth two months ago with $31 million in funding — is closing new funding. A $100 million round at a $1 billion valuation is the amount we are hearing. The deal may not be final and so could still be subject to change.
Black Forest is not just any AI startup: The company was co-founded by the engineers who built the technology behind Stability AI. And it has a big-name customer. Elon Musk’s X.ai is using Black Forest’s Flux.1 text-to-image model to power image generation in its Grok chatbot. That’s a service that set people chattering immediately after it was launched in part because of the audacious results people generated with it.
“No filters” still appears to be a thing a month later. We created the image on the right earlier this week.
The company is also catching the eye of investors because of its founders and founding team. They include Andreas Blattmann, Patrick Esser, Dominik Lorenz and CEO Robin Rombach, researchers who created Stability AI, considered a game-changing platform for image generation.
“Robin Rombach is known to be an absolute expert at image diffusion models and when you have someone that smart and proven in a brand new space, it makes it obvious one should invest if given the chance,” one of the company’s investors told TechCrunch.
It’s not completely clear yet who is investing in the Freiburg, Germany-based startup’s latest round. One source mentioned that Lightspeed — one of the more prolific investors in AI in Europe, backing Helsing, Mistral, Stability AI and others — might be involved. Lightspeed has not yet responded to a request for comment, and neither has Black Forest itself. (We will update the post if they do.)
The company’s previous, $31 million round included a high-wattage list of investors. Led by Andreessen Horowitz, others, per PitchBook data, included General Catalyst and Stuttgart VC Mätch.vc, with Nvidia’s Timo Aila, Oculus co-founder Brendan Iribe, Apple AI research scientist Vladlen Koltun, entertainment mogul Michael Ovitz, and Y Combinator’s Garry Tan also in the mix.
The $1 billion valuation is a big jump on its post-money valuation from that last round, which was a more modest $150 million. (Asked about more funding, Andreessen Horowitz declined to comment for this story.)
Rapid fundraising in the area of generative AI has become quite commonplace in the current market: Startups building these tools need the funding to buy compute, to hire talent, perhaps to settle IP licensing agreements, and for marketing and business development to compete against bigger and even more well-funded players. In the case of Black Forest Labs, there are more technology launches coming up soon. The company has already said it’s working on a state-of-the-art text-to-video tool, with an as-yet-unannounced debut date.
But the market has been tricky and sometimes unkind to some of the smaller AI players that have raised a lot and now have pressure to deliver. H in Paris, a generative AI startup started by DeepMind alums, raised $220 million in May of this year. It has already lost three of its five co-founders, allegedly over operational differences. Aleph Alpha, which has raised more than $500 million, appears to have pivoted to enterprise services over building foundational models.
“Getting into a headline position, being put into the spotlight, but not delivering,” was how another investor who talked to TechCrunch described the predicament that companies like Aleph Alpha and H have faced.
Black Forest Labs will naturally try to avoid such issues, especially since — at least for the moment — it lacks a strategic investor that might prop it up with giant amounts of cash to grow more aggressively. Said this same investor: “I think they will try to go down the other road, the one of staying as secretive as possible.”
Snap CEO says the company is testing a 'simplified' Snapchat
Snap is testing a “simplified version of Snapchat,” CEO Evan Spiegel wrote in a letter to employees published on Snap’s website Tuesday. The CEO says the simplified version aims to improve the platform’s accessibility and usability. For those that remember Snapchat’s 2018 redesign, this news may do little to stoke confidence.
Spiegel attempted to rally employee spirits with his letter on Tuesday after a depressing year for the company’s stock price, which has fallen nearly 50% in 2024.
“Investors are concerned that we aren’t growing faster,” said Spiegel in the letter.
The “simplified” Snapchat may be an attempt to capture older users, who are historically perplexed by the app’s not-so-intuitive design. Snapchat does a lot better at attracting younger audiences, who seem to just get the app. But this isn’t the first time Snapchat has tried to reconcile these issues.
You might remember Snap’s 2017 earnings call when Spiegel admitted that he’s heard, “Snapchat is difficult to understand or hard to use,” particularly for older folks. Months later, Snap pushed out a major redesign to reclaim those users, jamming Stories between private messages, among other changes that ended up infuriating more users than it attracted.
A 2018 Change.org petition to “remove the new Snapchat update” received 1.2 million signatories, while celebrity influencers like Kylie Jenner, Chrissy Teigen and Marques Brownlee expressed their frustration. But even worse, the redesign cratered the platform’s ad views and revenue, alienating its younger userbase while failing in its bid to attract older folks. By May of 2018, Snap was scrambling to roll back some of the changes.
Spiegel writes in Tuesday’s letter that early tests of the simplified redesign have been “directionally positive,” though the CEO notes “we will be thoughtful and deliberate about making a change of this magnitude.” He’s almost definitely alluding to the 2018 redesign failure, which I’m sure no one at Snap has forgotten about.
The announcement of a new, simplified version of Snapchat was tucked into Spiegel’s broader musings about Snap’s business strategy. He claimed that Snap’s venture into augmented reality glasses — which it calls Spectacles — would yield a market with no competitors. Perhaps he’s pretending that Meta’s AR glasses, Meta Ray-Bans, simply don’t exist?
In an effort to stimulate Snapchat’s struggling ad division, Spiegel also announced new placements for ads, called Sponsored Snaps and Promoted Places. The former allows advertisers to send Snapchats directly to users’ chat inboxes, and the latter lets advertisers promote destinations on Snap Map.
Subscription vitamin company Care/of is shutting down
Care/of, a company offering personalized subscription vitamin packs, says it will be canceling all subscriptions as of Monday, June 17 and will no longer be accepting new orders.
The news doesn’t come completely out of the blue, as Care/of had previously disclosed in a New York Department of Labor filing that it planned to lay off all 143 employees by July 3 due to a “funding loss.” Now the company is being more specific and definitive about the closure, with a post yesterday on Instagram thanking customers and saying, “We unfortunately no longer have funding to operate in the way we have been.”
The post doesn’t completely close the door on a revival, claiming, “We are actively exploring options for the brand but do not have anything definitive to communicate at this time. We hope to be in a place to share more soon.”
Founded in 2016 by Craig Elbert and Akash Shah, Care/of asked customers to fill out a quiz about their lifestyle and values, which it used to recommend a personalized mix of vitamins and supplements. Its investors included Juxtapose, Goodwater Capital, Tusk Venture Partners, Bullish, and RRE Ventures; they funded the company to the tune of $46 million altogether.
Pharmaceutical giant Bayer acquired a 70% stake in Care/of in 2020 in a transaction that was reportedly valued at $225 million. Earlier this month, Bayer’s director of strategic communications Christin Miller told NutraIngredients that “ceasing further investment in Care/of will allow Bayer to better invest in future innovations at help people manage their personalize health.”
Exclusive: Humane execs leave company to found AI fact-checking startup
As Humane struggles to find its footing in the nascent world of AI hardware, two top employees have exited the company to found their own startup. It’s a story that, in some ways, echoes Humane’s own origin story, as founders Bethany Bongiorno and Imran Chaudhri left longtime roles at Apple to launch their own company.
Former Humane Strategic Partnerships Lead Brooke Hartley Moy and Head of Product Engineering Ken Kocienda are wisely staying away from the fraught world of hardware with Infactory, a kind of fact-checking search engine. The project is still in its infancy, but the founders spoke to TechCrunch about their plans — a dramatic shift from Humane’s pre-launch secrecy.
Naturally, AI will play an important role in the project. For one thing, Kocienda, who has his own 16-year history with Apple, began working in the space well before Humane’s launch. For another, it’s next to impossible to launch a startup in 2024 without some upfront AI pitch.
According to Hartley Moy and Kocienda, who now serve as CEO and CTO, respectively, one thing that will set Infactory apart from others is the knowledge of when to — and more importantly, when not to — use AI. Large language models (LLMs) will be utilized to create a more natural language interface with the platform, so users won’t have to type in various configurations of words in order to get the intended results.
AI will not, however, be implemented in the results themselves. Unlike Google’s current search results, which prioritize a Gemini summary of information, Infactory will pull information directly from trusted resources, citation included. While people will no doubt continue to question the accuracy of any given source, the new service won’t be subject to the same sorts of hallucinations that plague the current crop of generative AI services.
Infactory will utilize subscription pricing, aimed at enterprise customers, rather than consumers. Potential clients for the service include newsrooms and research facilities. Rather than wading into far more objective subjects like politics, the service will be focused exclusively on data at launch.
Kocienda offers as an example a financial publication that is looking to directly compare the annual financials of two separate companies. It’s a relatively easy search, but one can envision examples that might be more difficult to come by. To use an example nearer to my heart, say you want to compare how many Apple and Samsung devices were sold in the past five years. The service would locate and collate that information.
In launching a fact-checking engine, one needs to ensure the information is being drawn from the most accurate sources available.
“Our goal here is to be selective from a partnership perspective,” Hartley Moy said. “Not all data partners are created equal. I think the reason that we are focusing more on the data vendors over the content providers is that, when it comes to things that are more computational, more based in fact, their business is ensuring that those things are accurate.”
Infactory has thus raised a pre-seed, though its founders declined to confirm the amount or investors. Seed funding will be a focus for the next “six to 18 months,” per Hartley Moy.
The founders acknowledge that their exit from Humane arrived as their former employer has been awash with post-launch struggles. After the much-hyped Ai Pin arrived to scathing reviews and broader consumer disinterest, Humane laid off 10 people and has more recently been rumored to be exploring a sale.
Ultimately, however, both of Infactory’s co-founders deny that their decision to found their own company was a direct result of Humane’s much publicized struggles.
“Hardware is hard,” Kocienda told TechCrunch. “Starting a company is hard. Putting your life’s work out there for it to be judged by the world — as we’re learning — takes a lot of guts and special skills and personalities. I have endless respect for founders and anyone who’s willing to take that kind of risk. I think it’s good for the industry overall to have people that do want to take those risks — that the entire pace of innovation isn’t being set by a handful of conglomerates. I like the idea of scrappy startups trying to put out new hardware and software solutions.”
As for Infactory’s own launch, Hartley Moy says it’s coming in a matter of months.
Spotify CEO says company is in 'early days' of hi-fi audio plans
Spotify CEO Daniel Ek says the streaming service is still in the “early days” of its plans to bring hi-fi support to the platform. During the company’s earnings call on Tuesday, the executive offered details about an upcoming deluxe tier.
Spotify announced back in 2021 that it was going to roll out a new high-end subscription tier called Spotify HiFi. At the time, the company said the tier would allow users to upgrade their sound quality to a “CD-quality, lossless audio format.” Fast-forward to the middle of 2024, and the company has yet to release the tier.
“The plan here is to offer a much better version of Spotify,” Ek said on the call with investors. “Think something like $5 above the current premium tier. So it’s probably around a $17 or $18 price point, but sort of a deluxe version of Spotify that has all of the benefits that the normal Spotify version has, but a lot more control, a lot higher quality across the board, and some other things that I’m not ready to talk about just yet.”
The pricing is on-par with Bloomberg’s reporting from last month, which revealed that the higher-priced premium plan will cost at least $5 more per month. While the tier will include the long-awaited hi-fi audio streaming, it’s also reportedly going to include new tools for creating playlists, along with additional features.
“There’s a good subset of that group of 246 million subscribers that want a much better version of Spotify,” Ek said. “Those are huge music lovers who are primarily looking for even more flexibility in how they use Spotify and the music capabilities that exist on Spotify.”
Apple Music and Amazon Music have offered lossless audio streaming for years, at no extra cost. It’s unknown why it’s taking Spotify so long to release the tier, but it’s possible that the company wants to ensure that it’s offering enough value to users to charge for the addition, even as its competitors offer it for free.
Zoe, a microbiome-focused nutrition company, raises $15M to expand in the US
Zoe, a nutrition company based in London, is expanding its presence in the United States after raising $15 million in a Series B extension.
Here’s how it works: Zoe sends customers at-home testing materials to collect blood or feces to test blood fat, blood sugar, and gut microbiome health. Following those results, the company scores every food (on a scale from 0 to 100), so people can make better choices of what to eat.
Along the way, Zoe teaches users how to swap, add, and combine foods so you can eat in the best way for your body. For example, it might advise a user to swap out toast with peanut butter, bananas, and sliced almonds for toast with cream cheese, avocado, and chia seeds. It also tracks their progress with continued gut microbiome testing.
The new investment comes from the U.S.-based investment company Coefficient Capital and gives Zoe $118 million in total funding to date, including a £25 million ($30 million at the time) raise in 2022.
The latest raise follows the completion of a randomized controlled trial published in Nature Medicine in May 2024. The trial looked at the effects of personalized nutrition on cardiometabolic health. This is among 60 peer-reviewed scientific papers Zoe has published over the past seven years and is meant to counter the perception that microbiome mapping is squishy science.
Company CEO Jonathan Wolf explained that the trial is the same thing that is done for vaccines or drugs and is the “gold standard in medicine.” It’s a full trial where you compare the intervention — in this case, Zoe’s membership — against the control, or basic standard of care in the U.S. and dietary guidelines.
What makes it interesting, other than finding out the results, is that the researchers are obliged to publish the outcome, no matter what it says.
“As a CEO, it’s terrifying to go into this RCT because you are committed,” Wolf told TechCrunch. “If it proves that Zoe doesn’t work, you’ve got to publish it.”
The research showed Zoe did work and “comprehensively outperformed the control,” he said. Results showed that using Zoe can improve biological markers after three to four months, and also made a positive impact on how people felt, something Wolf said he wasn’t expecting. For example, Zoe users reported improvements to mood, sleep, and energy.
Losing weight has always been a trend but is particularly hot now with the rise of GLP-1 injectables like Ozempic and Wegovy, However, Wolf was clear that Zoe wasn’t going after weight loss. Instead, the company is focused on nutrition, and better nutrition often leads to weight loss.
“Nutrition has been horrendously understudied because there’s been no money in it from pharmaceutical companies,” Wolf said. “Therefore, advice is often ‘eat more vegetables.’ And most of the advice that we have been taught has turned out to just be wrong. For example, if you need to lose weight, you should go on a calorie-controlled diet. All the latest nutritional science says that calorie-controlled diets do not work for 80% of people.”
Wolf didn’t disclose financial numbers but did say that the company had virtually no revenue two years ago. Now its paid customer base has risen to more than 100,000. Most are purchasing a 12-month subscription, which costs $29 per month in the U.S., or $348 per year.
The company’s products are available in the United States everywhere except New York, due to regulatory challenges that Wolf and his team are working through. The new funding will help the company increase its presence in the U.S.
“We are going to start investing in marketing because there are millions of people we know we can help in the States,” Wolf said. “For the first time, the product is ready and mature enough for us to do that.”
Palico is now the first FINRA-approved company to facilitate online LP-led secondaries deals
Limited partners selling their investment stakes in venture capital funds to other LPs on the secondary market is nothing new. But traditionally these transactions happen offline through an opaque network of brokers that could charge costly fees and prove prohibitive for certain LPs to participate. Palico is looking to change that.
Paris-based Palico quietly got approval from the Financial Industry Regulatory Authority (FINRA) in July to be the first company able to facilitate end-to-end LP secondaries transactions online as an electronic trading system (ETS). This approval could have large implications on the LP-led secondaries market as LPs need sources of liquidity as companies stay private longer and small LPs get overlooked by brokers.
Palico is set up as a marketplace. LPs looking to sell either a single fund stake, or a group of stakes from different funds, upload a data room of information on what they are selling. Buyers on the platform can request access to an LP’s data room and then get in touch if they are interested.
Christopher Jeffery, a general manager at Palico, told TechCrunch that Palico started building up its marketplace over two years ago. Originally, it was a place for sellers and buyers to get connected before taking a deal offline. Palico expects to launch the capability to buy directly on the platform by the end of the summer. Jeffery said the platform offers a standard set of deal terms for each transaction, but LPs don’t have to use them.
“Buyers very easily come and see what is for sale and essentially bid on the stake, or the portfolio, and allow the seller to choose and conclude that deal,” Jeffery said. “Honestly in practice it isn’t too different to how eBay works when you transact on it.”
This news comes at a time when venture secondaries are really exploding. While a lot of the recent attention centers on direct secondaries buying an existing stake in a single company, the LP side is heating up, too, Jeffery said. LPs also need liquidity because venture capital firms, which already hold portfolio companies longer than any other asset class, hold on to companies even longer.
“There are also a lot of sellers that look at secondaries as a portfolio management tool,” Jeffery said. “A lot of institutional investors are becoming a lot more sophisticated about secondaries.”
The makeup of what LPs and GPs look like in venture has changed a lot, too. Venture capital was once a handful of firms that dominated the cottage industry backed by large institutional LPs. That’s changed. The proliferation of micro and emerging VCs over the last 10 years, and even more so over the last five, has created a very different market. Smaller funds means smaller LP stakes. While Palico can work with LPs of all sizes, it fills the biggest need for smaller LPs that are often unable to work with secondaries brokers.
“Much like in real estate, those brokers are heavily incentivized to focus on the large tickets,” Jeffery said. “That’s where [Palico] has a lot more value. We have trades starting at $1 million. One of the main things is just having a venue where you can get a cost-effective way to sell smaller stakes. If [brokers] start doing stakes that are sub $20 million or sub $10 million, they will have to increase their fees.”
While Palico is the first company to get approval to facilitate LP-led secondaries transactions online, it likely won’t be the last. But it will probably be the only for at least a while. Many secondaries-focused startups have launched in the last few years, including Caplight, Hiive and Notice, but almost all of them are focused on direct secondaries.
Jeffery said that isn’t surprising, saying that direct secondaries can be a little easier to quantify on the data side as many company valuations on the direct secondary market are tied to primary valuations from funding rounds or mutual fund marks. Pricing an LP secondary stake is a little bit more complicated.
“At the fund level, each fund might share many of the same underlying companies but they aren’t made up the same way,” Jeffery said. “You aren’t able to standardize each fund as easily.”
But as more buyers enter the LP-led secondaries market, and LP liquidity issues don’t seem poised to change anytime soon, Palico is well set up to meet the LP-led secondaries market’s growing demand.
“The broader secondaries space will continue to grow; it still makes up a tiny portion of the overall AUM in private markets,” Jeffery said. “Institutional investors, they’ve only put more and more money into alternatives. Those funds will get older and you want to see what you can do with those funds. More funds will be put to play in secondaries for sure.”
Zoe, a microbiome-focused nutrition company, raises $15 million to expand in the U.S.
Zoe, a nutrition company based in London, is expanding its presence in the United States after raising $15 million in a Series B extension.
Here’s how it works: Zoe sends customers at-home testing materials to collect blood or feces to test blood fat, blood sugar, and gut microbiome health. Following those results, the company scores every food (on a scale from 0 to 100), so people can make better choices of what to eat.
Along the way, Zoe teaches users how to swap, add, and combine foods so you can eat in the best way for your body. For example, it might advise a user to swap out toast with peanut butter, bananas, and sliced almonds for toast with cream cheese, avocado, and chia seeds. It also tracks their progress with continued gut microbiome testing.
The new investment comes from the U.S.-based investment company Coefficient Capital and gives Zoe $118 million in total funding to date, including a £25 million ($30 million at the time) raise in 2022.
The latest raise follows the completion of a randomized controlled trial published in Nature Medicine in May 2024. The trial looked at the effects of personalized nutrition on cardiometabolic health. This is among 60 peer-reviewed scientific papers Zoe has published over the past seven years, and is meant to counter the perception that microbiome mapping is squishy science.
Company CEO Jonathan Wolf explained that the trial is the same thing that is done for vaccines or drugs, and is the “gold standard in medicine.” It’s a full trial where you compare the intervention — in this case, Zoe’s membership — against the control, or basic standard of care in the U.S. and dietary guidelines.
What makes it interesting, other than finding out the results, is that the researchers are obliged to publish the outcome, no matter what it says.
“As a CEO, it’s terrifying to go into this RCT because you are committed,” Wolf told TechCrunch. “If it proves that Zoe doesn’t work, you’ve got to publish it.”
The research showed Zoe did work and “comprehensively outperformed the control,” he said. Results showed that using Zoe can improve biological markers after three to four months, and also made a positive impact on how people felt, something Wolf said he wasn’t expecting. For example, Zoe users reported improvements to mood, sleep, and energy.
Losing weight has always been a trend, but is particularly hot now with the rise of GLP-1 injectables like Ozempic and Wegovy, However, Wolf was clear that Zoe wasn’t going after weight loss. Instead, the company is focused on nutrition, and better nutrition often leads to weight loss.
“Nutrition has been horrendously understudied because there’s been no money in it from pharmaceutical companies,” Wolf said. “Therefore, advice is often ‘eat more vegetables.’ And most of the advice that we have been taught has turned out to just be wrong. For example, if you need to lose weight, you should go on a calorie-controlled diet. All the latest nutritional science says that calorie-controlled diets do not work for 80% of people.”
Wolf didn’t disclose financial numbers but did say that the company had virtually no revenue two years ago. Now its paid customer base has risen to more than 100,000. Most are purchasing a 12-month subscription, which costs $29 per month in the U.S., or $348 per year.
The company’s products are available in the United States everywhere except New York, due to regulatory challenges that Wolf and his team are working through. The new funding will help the company increase its presence in the U.S.
“We are going to start investing in marketing because there are millions of people we know we can help in the States,” Wolf said. “For the first time, the product is ready and mature enough for us to do that.”