A well-known person once said that everyone has a story to tell. An early stage company called Inkitt thinks it can use AI to make the best of these into huge hits and use that material to create a new “Disney” for the 21st century. It has now raised $37 million to help reach that goal.
The startup’s name-brand app lets people self-publish stories. Then, using AI and data science, it picks the most interesting ones to change, then share and sell on a different app called Galatea.
The company said that its business already has 33 million users and dozens of best-sellers. With the Series C funding it got, it will be able to make more types of content. For example, it will use AI to write stories based on your own ideas and to make personalized versions of its fiction for different readers. It will also make games and audiobooks, and it will make more videos based on fiction published on its platform. These videos are currently made by humans, but in the future, AI will also be used to make them.
The company’s CEO and founder, Ali Albazaz, says the long-term goal is to grow the library of material and build a multimedia empire around it. Not so much a rival to Wattpad as “the Disney of the 21st century,” as he puts it.
Vinod Khosla of Khosla Ventures is in charge of the $37 million Series C round. Previous backers NEA, Kleiner Perkins, and Redalpine, as well as other investors who were not named, also took part.
So far, Inkitt has raised a total of $117 million, with a $3.9 million seed round, a $16 million Series A round, and a $59 million Series B round. At least one publisher has already asked to buy it, and investors are already talking to Inkitt about raising more money, which is unusual for consumer-focused startups these days.
For now, this Series C puts Inkitt’s value at around $400 million after the money has been paid out. For some background, it was worth about $390 million when it raised its Series B round of funding. So, even though the valuation has gone up, the deal may have been more cautious, which is not a surprise given the current state of funding and the funding environment for consumer-focused companies.
In A Way, Inkitt’s Goals Are A Big Zig In The Publishing Industry’s Zag.
Reading has been going down for the past 20 years because more people have cell phones and apps that are designed to take up minutes (or even hours) of their free time. The Bureau of Labor Statistics last looked at this data in 2022. In that year, the average American adult read for only about 15 minutes a day, down from more than 20 minutes a few years earlier. That same amount of books read (and finished) has dropped to about 5.
Inkitt is playing against that trend by, strangely, going with it. It thinks it can get its users to read more and be more involved by coming up with new ways to deliver books, making chapters shorter and easier to read on phones, and adding effects (like sounds) to the text to make the reading experience more interesting.
And also by making the books more like what fans want. Any part of the work is put through A/B tests, from the title and story arc to the first lines and cliffhangers. That gives Inkitt a lot of information not only about specific books but also about how fiction in general is doing and what works best. This information can then be used right away to help print new books.
It looks like all of that is paying off. Some services that did really well during the worst of the COVID-19 pandemic have slowed down or gone back to more normal growth trends in the years since. These include “instant” deliveries, online shopping, virtual events, and streams of everything. Inkitt, Galatea, and the newest member of the business, Galatea TV, have all seen more time spent on their sites.
“People have so much going on now,” Albazaz said of the years after the plague. “They want to get away, and we think that’s why we’ve been doing so well.”
He said that Inkitt is the 11th best-selling publisher in the world, ahead of well-known companies like Penguin Random House. He said that this was because its algorithms give it a “20x” higher success rate than standard publishers at publishing a best-selling book.
In the past year, sales have increased, but the company doesn’t give an exact number. Even though younger projects like Galatea TV are more of a spinoff of reading, they are making a lot of money on their own. He said that the TV show Beautiful Mistake, which was based on the Galatea book of the same name, has already made $500,000. He also said that the business is “almost profitable.” He said that the royalties are higher than what more traditional companies usually pay to less well-known writers, but he wouldn’t give exact numbers.
It was started in Berlin and is now based in San Francisco. Inkitt publishes fiction, but it wouldn’t be fair to say that it aims for creative fiction. A famous author who tried out the platform a few years ago left in horror and disgust after Inkitt suggested some changes to an upcoming book. Albazaz said that Inkitt would rather focus on the long tail of undiscovered talent than deal with the hassles of working with big names and egos.
How willing that long tail is to give in to the algorithm’s will will be interesting to see. Albazaz said that one thing it wants to do more of in the future is produce stories using AI algorithms based on catchy treatments written by skilled humans. They also want to use AI algorithms to personalize stories.
He also said that personalizing is still very much a work in progress, with Inkitt testing out different levels of changes that it could make to a unique work or even give readers more control.
To make this idea come true, the company has been testing different LLMs for story building, such as APIs from OpenAI, Anthropic, and Mistral AI (which Albazaz said is the startup’s current favorite for shorter passages), and making its own changes to them, he said.
It also comes out automatically in 10 languages for every book: This job is mostly done by DeepL, which is an AI. It uses ElevenLabs’ text-to-speech voice generator for its podcasts and Leonardo for cover art right now (it switched from Midjourney not long ago, he said). To get the best result, it seems like the main idea is to stick with a mix.
“The writing these LLMs do is really bad to average,” he said. “The point is that LLMs can’t make best-selling content by themselves.” That’s where the information we’ve gathered over the last few years comes in handy.
There is also an interesting IP reason for this: Inkitt doesn’t want to rely on a single LLM for a full book because, he said, platforms say they have no plans to use proprietary data to train their models, but Inkitt doesn’t want to take a chance. So that it doesn’t teach the LLMs too much about Inkitt’s best work, it sometimes asks very flat questions.
The startup has found ways to float even though it has to stay above those rough waves to avoid drowning. The company was able to get its first investor because it was focused on building an AI-powered content empire. At the end of last year, Vinod Khosla wrote that he thought hyper-personalized entertainment would be the way of the future. This fits well with Inkitt’s goal (and so far, success).
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Vinod told us in a statement that “with the advent of AI, entertainment could be plentiful and personalized,” but he wouldn’t be interviewed for this story. “That’s exactly what Inkitt does with storiesāit makes content that is highly personalized and important to each person.”
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