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Consumer demand for the latest AI technology is heating up. The launch of OpenAI’s latest flagship model, GPT-4o, has now driven the company’s biggest-ever spike in revenue on mobile, despite the model being freely available on the web. GPT-4o, launched last Monday, can handle text, speech, and video, and delivers real-time responsiveness and a range […]
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If you were concerned about slowing cloud infrastructure growth for a time in 2023, you can finally relax: The cloud was back with a vengeance this quarter. The market as a whole was up a healthy $13.5 billion to $76 billion, up 21% over the first quarter in 2023, per Synergy Research.
That’s healthy growth by any measure.
If you’re wondering what’s driving the growth, you probably guessed that it’s related to generative AI and the copious amount of data required to build the underlying models. Whether it’s Microsoft’s close links to OpenAI, Google Cloud making a slew of AI announcements at its recent customer conference or Amazon’s infrastructure managing the data side of the equation, AI is driving lots of business for these vendors.
“There is a symbiotic relationship between the rapid advancement and adoption of AI and the scalable ‘Big 3’ cloud infrastructure providers,” said Rudina Seseri, founder and managing partner at Glasswing Ventures, a firm that invests heavily in AI startups. “AI actually makes the cloud providers more valuable. By creating more capabilities for computing through automation and augmentation within the enterprise, there is a corresponding increased demand for the underlying computational power provided by the Big 3 cloud infrastructure vendors, as evidenced by their immense growth in recent quarters.”
Seseri also sees the cloud vendors making it easier for startups to build on top of their infrastructure in the coming years. “For startups, many depend on the cloud providers, having built atop these immense platforms. I predict we will see immense investment in AI-optimized infrastructure by the major cloud platforms, as it is a key driver behind the sustained growth in cloud computing, which will make it easier to build AI platforms and products on the cloud,” she said.
And these companies are reaping the financial windfall for the newfound interest in this technology. Altimeter partner Jamin Ball reports that those rewards started coming in last quarter, and the ball kept on rolling into this one. Amazon cloud growth had dropped as low as 12% in Q2 and Q3 last year, climbing a bit to 13% in Q4. But the company really kicked it up a notch this quarter with revenue of $25 billion, up 17% over the prior year. That’s a $100 billion run rate, good for 31% market share.
Ball’s numbers indicate that Azure continues to kill it. The company now has 25% market share, good for a $76 billion run rate, up 31% over the previous year. Google is a strong third with 11% market share, up 28% YoY (although it’s important to note that Ball’s number includes Google Workspace, and Synergy’s numbers are only infrastructure and platform numbers).
Image Credits: Jamin Ball
The days of cost cutting in the cloud appear to be over. And although we probably aren’t going back to the heady growth numbers of 2021 and 2022, AI seems to be bringing a new wave of substantial growth to the cloud vendors.
“In terms of annualized run rate, we now have a $300 billion market, which is growing at 21% per year,” Synergy’s chief analyst John Dinsdale said in a statement. “We will not return to the growth rates seen prior to 2022, as the market has become too massive to grow that rapidly, but we will see the market continue to expand substantially. We are forecasting that it will double in size over the next four years.”
As companies’ continuing thirst for AI and the data management related to that grows, it seems that the cloud glory days are back. The growth may not be as gaudy as back in the day, but it’s still pretty darn good for a maturing industry sector, with all signs pointing to solid growth in the coming years.
Image Credits: Synergy Research
When you’re an early stage startup, you are clamoring for customers. It’s imperative that you start generating revenue as soon as possible because it is a metric that investors look at: how fast you’re growing revenue between your seed and your A round.
If you aren’t generating a ton of revenue, you’ll probably have a tough time when it comes to raising your next round. Alex Kayyal, a partner at Lightspeed Venture Partners, speaking at TechCrunch Early Stage in Boston last week, says that finding the right early partners is crucial.
One issue that sometimes comes up for early-stage companies is the single big customer. The company is large and influential, but you aren’t building a product for the needs of one company. You need to address a broad range of use cases to really jumpstart the revenue machine.
“I think as a startup one of the hardest things to do is saying no to revenue, and a customer, who is willing to say, ‘Hey here’s a $200k check for your product,’” Kayyal said. That’s especially true when that check might be so much bigger than your next closest customer. But at the same time, you also don’t want to be an outsourced development shop for one company, and that’s a real danger with the one big customer phenomenon.
The trouble with one big customer is that it has the power to throw its weight around. “You know you see this all the time in retail with Walmart where they can dictate terms. They can drive pricing power, and as a small company you’re at their whim,” he said.
As tempting as it is to take the money and run, a startup can’t afford to take on a customer at the cost of other customers. So sometimes saying no and actually knowing when is the right time to work with a company like that is a key skill for young companies.
“It can lead to a slippery slope where your customizing code and building features just for them, and unfortunately that doesn’t represent the rest of the market,” Kayyal said. “Your real goal is product-market fit and product-market fit that is repeatable across the industry, not just with one customer.”
Was Quibi just ahead of its time? Quibi founder Jeffrey Katzenberg ultimately blamed the COVID-19 pandemic for the failure of his short-form video app, but maybe it was just too soon. New app store data indicates that the idea Quibi popularized — original shows cut into short clips, offering quick entertainment — is now making a comeback. In the first quarter of 2024, 66 short drama apps like ReelShort and DramaBox pulled in record revenue of $146 million in global consumer spending.
This represents an over 8,000% increase from $1.8 million in the first quarter of 2023, when just 21 apps were available, according to data from app intelligence firm Appfigures. Since then, 45 more apps have joined the market, earning approximately $245 million in gross consumer spending and reaching some 121 million downloads.
Image Credits: Appfigures
In March 2024 alone, consumers spent $65 million on short drama apps, a 10,500% increase from the $619,000 spent in March 2023.
It appears the revenue growth began to accelerate in fall 2023, per Appfigures data, leading to a huge revenue jump between February and March of this year, when global revenue grew 56% to reach $65.7 million, up from $42 million. In part, the revenue growth is tied to the larger number of apps available, of course, but marketing, ad spend and consumer interest also played a role.
The top apps by revenue — ReelShort (No. 1) and DramaBox (No. 2) — generated $52 million and $35 million in Q1 2024, respectively. That’s around 37% and 24% of the revenue generated by the top 10 apps, respectively.
The No. 3 app ShortTV grossed $17 million globally in Q1, or 12% of the total.
What’s interesting about these apps, compared with Quibi’s earlier attempt to carve out a niche in this space, is the content quality. That is, it’s much, much worse than Quibi’s — and Quibi’s was not always great. As TechCrunch wrote last year when describing ReelShort, the stories in the app are “like snippets from low-quality soaps — or as if those mobile storytelling games came to life.”
Regardless of the terrible acting and writing, the apps have seemingly found a bit of an audience.
Image Credits: Appfigures
By both installs and revenue, the U.S. is by far the leader in terms of top markets for this cohort. But overall, the charts vary in terms of which countries are downloading versus paying for the content.
By installs, the top markets after the U.S. are Indonesia, India, the Philippines and Brazil, while the U.K., Australia, Canada and the Philippines make up the top markets by revenue, beyond the U.S.
In Q1 2024, short drama apps were installed nearly 37 million times, up 992% from 3.4 million in Q1 2023. By downloads, ReelShort and ShortTV are the top two apps, with the former accounting for 37% of installs, or 13.3 million, and the latter with 10 million installs, or 27%. DramaBox, No. 2 by consumer spending, was No. 3 by installs with 7 million (19%) downloads.
Image Credits: Appfigures
Mirroring wider app store trends, the majority of the revenue (63%) is generated on iOS, while Android accounts for the majority (67%) of downloads.
Though there’s growth in this market, these apps see nowhere near the attraction that their nearest competitors — short-form video and streaming video — do. Short drama apps claimed a 6.7% share of the total across all three categories combined, up from 0.15% a year ago. But the wider video app market makes a lot more money.
For instance, the top 10 apps across the combined three categories, which include apps like TikTok and Disney+, made $1.8 billion in Q1.
Image Credits: Appfigures
Image Credits: Appfigures
Lerato Motloung is a mother of two who works in a supermarket in Johannesburg, South Africa. After her phone was stolen, Motloung had to go without a mobile phone for nine months because she could not afford a new one. Then, in February 2024, she saw a sign about PayJoy, a startup that offers lending to the underserved in emerging markets. She was soon able to buy her first smartphone.
Motloung is one of millions of customers that San Francisco–based PayJoy has helped since its 2015 inception. (She was its 10 millionth customer.) The company’s mission is to “provide a fair and responsible entry point for individuals in emerging markets to enter the modern financial system, build credit, achieve economic freedom, and access digital connectivity.”
Image Credits: PayJoy
PayJoy became a public benefit corporation last year and is an example of a company attempting to do good while also generating meaningful revenue and running a profitable business. And, unlike other startups offering loans to the underserved, it’s doing so in a way that’s not predatory, it says.
“We meet customers where they are — even with no bank account or formal credit history, we create access to financial services and carve a path into the financial system,” said co-founder and CEO Doug Ricket.
PayJoy is applying a buy now, pay-as-you-go model to the estimated 3 billion adults globally who don’t have credit by allowing them to purchase smartphones and pay weekly for a 3- to 12-month period. The phones themselves are used as collateral for the loan.
While the loans are interest free, with no late or hidden fees, the company does mark up the price it charges for the phones by a “multiple,” Ricket said. But it shares the full price upfront before customers sign a contract.
“Users will never pay more than the disclosed amount and can return their phone and walk away debt-free at any time,” he says.
If a customer does miss a payment, their device is locked and is unusable outside of contacting PayJoy or emergency services. To unlock the device, the user needs to make a single weekly payment and the device will then be unlocked for 7 days.
Adds Ricket: “Even upon serious delinquency, PayJoy does not repossess the device and does not communicate individual loan performance to retail partners. PayJoy does report loan performance to credit bureaus including both positive and negative history, so their credit report will be affected accordingly.”
By the fourth quarter of 2023, PayJoy had achieved an annualized run rate of more than $300 million, Ricket told TechCrunch exclusively. That’s up from $10 million in 2020, when it first introduced lending. And the company was “net income profitable” in 2023. It also managed to raise significant capital during a challenging fundraising environment. Last September, PayJoy announced that it had secured $150 million in Series C equity funding and $210 million in debt financing. Warburg Pincus led its equity raise, which included participation from Invus, Citi Ventures and prior lead investors Union Square Ventures and Greylock.
PayJoy has come a long way since TechCrunch first profiled it in December 2015 when it had secured $4.3 million in equity and debt about 10 months after its inception.
Image Credits: PayJoy
Today, the company operates in seven countries across regions such as Latin America, India, Africa and most recently, the Philippines — providing over $2 billion of credit to date. In October of 2023, the company launched PayJoy Card in Mexico, providing customers who have successfully repaid their smartphone loans with a revolving line of credit. Ricket says that PayJoy can “enable cheaper credit and … reduce default rates” by using data science and machine learning to underwrite its loans to assess a customer’s creditworthiness. He says 47% of its customers are women, 40% are new to credit and 37% are first-time smartphone users.
Ricket was inspired to start PayJoy after serving in the Peace Corps following his graduation from MIT. He then spent two years as a volunteer teacher in West Africa, where he became interested in technology in the context of international development. After the Peace Corps, he landed at Google, where he helped create the world’s first complete digital map.
Ricket then moved back to West Africa where he worked for D.Light Design in the pay-as-you-go solar industry. All of that experience has been combined in PayJoy.
The company is on track to achieve over 35% revenue growth this year, with strong momentum in Brazil and new product offerings in development, according to Ricket. Presently, the company has 1,400 employees. It has raised more than $400 million in debt and equity over its lifetime.
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Bot creators now have a new way to make money with Poe, the Quora-owned AI chatbot platform. On Monday, the company introduced a revenue model that allows creators to set a per-message price for their bots so they can make money whenever a user messages them. The addition follows an October 2023 release of a revenue-sharing program that would give bot creators a cut of the earnings when their users subscribed to Poe’s premium product.
First launched by Quora in February 2023, Poe offers users the ability to sample a variety of AI chatbots, including those from ChatGPT maker OpenAI, Anthropic, Google, and others. The idea is to give consumers an easy way to toy with new AI technologies all in one place while also giving Quora a potential source of new content.
The company’s revenue models offer a new twist on the creator economy by rewarding AI enthusiasts who generate “prompt bots,” as well as developer-built server bots that integrate with Poe’s AI.
Last fall, Quora announced it would begin a revenue-sharing program with bot creators and said it would “soon” open up the option for creators to set a per-message fee on their bots. Although it’s been nearly 5 months since that announcement — hardly “soon” — the latter is now going live.
Quora CEO Adam D’Angelo explained on Monday that Poe users will only see message points for each bot, which encompasses the same points they have as either a free user or Poe subscriber. However, creators will be paid in dollars, he said.
“This pricing mechanism is important for developers with substantial model inference or API costs,” D’Angelo noted in a post on X. “Our goal is to enable a thriving ecosystem of model developers and bot creators who build on top of models, and covering these operational costs is a key part of that,” he added.
The new revenue model could spur the development of new kinds of bots, including in areas like tutoring, knowledge, assistants, analysis, storytelling, and image generation, D’Angelo believes.
The offering is currently available to U.S. bot creators only but will expand globally in the future. It joins the creator monetization program that pays up to $20 per user who subscribes to Poe thanks to a creator’s bots.
Alongside the per-message revenue model, Poe also launched an enhanced analytics dashboard that displays average earnings for creators’ bots across paywalls, subscriptions, and messages. Its insights are updated daily and will allow creators to get a better handle on how their pricing drives bot usage and revenue.
Model N, a platform used by companies such as Johnson & Johnson, AstraZeneca, and AMD to automate decisions related to pricing, incentives, and compliance, is going private in a $1.25 billion deal with private equity firm Vista Equity Partners. The acquisition underscores how PE firms continue to scoop up tech companies that have struggled to perform well in public markets in the last couple of years.
Vista Equity is doling out $30 per share in the all-cash transaction, representing a 12% premium on Friday’s closing price, and 16% on its 30-day average.
This is Vista Equity’s fifth such acquisition in the past 18 months, following Avalara ($8.4 billion); KnowBe4 ($4.6 billion); Duck Creek Technologies ($2.6 billion); and EngageSmart ($4 billion).
Founded in 1999, Model N’s software integrates with various data sources and internal systems to help companies analyze trends, pricing efficacy, market demand, and more. The platform is typically used in industries such as pharmaceuticals and life sciences, where there may be complex pricing structures, and where regulatory or market changes can impact business.
The San Mateo-headquartered company went public on the New York Stock Exchange (NYSE) in 2013, and it has generally performed well in the intervening years — particularly since around 2019, when its market cap steadily started to increase, hitting an all-time high of $1.6 billion last year. However, its valuation has generally hovered below the $1 billion market for the past six months, sparking Vista Equity Partners into action today.
Vista said that it expects the transaction to close in the middle of 2024, though it is of course subject to the usual conditions, including shareholder approval.
Alex Chatzieleftheriou founded Blueground in 2013 after being frustrated with the dearth of short-term furnished apartments in Europe. He had been traveling as a consultant for McKinsey, living almost exclusively in hotel rooms for months.
“One time the company had to pay up to €15,000 for a hotel room in Amsterdam. And there wasn’t enough space nor a kitchen to cook,” he said. “I tried renting apartments for a month or more. But it was difficult, and landlords weren’t open to buying furniture. So I had created a business that would solve my problem.”
Some years later, at the height of the pandemic, business was booming for his startup’s category — short-term, furnished apartment rental companies — as people roamed the world while working from home.
Now that many employers have called workers back to offices, the demand for temporary housing has cratered.
Some of his competitors didn’t survive. Zeus Living and WanderJaunt shut their doors and returned the keys. Some became acquisition opportunities for Blueground. In 2022, the company gained a strong foothold in Latin America by buying Tabas, an operator of over 9,000 furnished apartments in Brazil. Within months, Blueground snagged Travelers Haven, a 15-year-old business that provides on-demand housing to workers in nearly 20,000 cities throughout the United States. In 2023 it picked up Nestpick, a marketplace for furnished apartment operators, like Kasa and Placemakr, and created a partner network giving customers access to an additional 18,000 apartments.
Blueground now operates a global network of move-in-ready homes for stays of a month or more and has raised $45 million in Series D funding from new investor Susquehanna Private Equity Investments along with other backers, including WestCap, Chatzieleftheriou told TechCrunch. The New York–based company said it also secured a debt facility from Barclays with participation from Morgan Stanley, Deutsche Bank and HSBC, which replaced and upsized the $40 million of debt Blueground obtained from Silicon Valley Bank in 2021.
Blueground leases apartments in popular neighborhoods and then equips and furnishes them for renters. The company currently manages 15,000 apartments in 32 markets in 17 countries. In addition to taking out its own leases, Blueground has recently begun to franchise with local operators in Japan and Thailand.
The company didn’t reveal its new valuation, but Chatzieleftheriou said that the company’s value has increased since its previous round. That valuation was reportedly $750 million after raising a $140 million Series C in September 2021.
It’s no secret that the fundraising environment has been extremely challenging for late-stage companies, especially those in the proptech sector, which has been battered by rising interest rates.
Chatzieleftheriou told TechCrunch that his company’s fast growth and near-profitability helped convince investors to fork over the latest funding.
Sales jumped by 70% to $560 million in 2023 over 2022’s $300 million in gross revenue, Chatzieleftheriou said. Gross margin — that’s after it pays landlords for leases — is approximately 35%, he added, and he expects Blueground to have positive cash flow in 2024.
While further acquisitions seem likely, given Chatzieleftheriou’s prediction of industry consolidation, the immediate focus is integrating these recent purchases. The new funding will go toward market expansion, technology investments, and possibly the ultimate financial goal: an IPO.
Tucked inside Canoo’s 2023 earnings report is a nugget regarding the use of CEO Tony Aquila’s private jet — just one of many expenses that illustrates the gap between spending and revenue at the EV startup.
Canoo posted Monday its fourth-quarter and full-year earnings for 2023 in a regulatory filing that shows a company burning through cash as it tries to scale up volume production of its commercial electric vehicles and avoid the same fate as other EV startups, like recently bankrupt Arrival. The regulatory filing once again contained a “going concern” warning — which has persisted since 2022 — as well as some progress on the expenses and revenue fronts.
The company generated $886,000 in revenue in 2023 compared to zero dollars in 2022, as the company delivered 22 vehicles to entities like NASA and the state of Oklahoma. And it did reduce its loss from operations by nearly half, from $506 million in 2022 to $267 million in 2023. The revenue-to-losses gap is still considerable though: The company reported total net losses of $302.6 million in 2023.
Still, one only needs to look at what Canoo is paying to rent the CEO’s private jet to put those “wins” into perspective. Under a deal reached in November 2020, Canoo reimburses Aquila Family Ventures, an entity owned by the CEO, for use of an aircraft. In 2023, Canoo spent $1.7 million on this reimbursement — that’s double the amount of revenue it generated. Canoo paid Aquila Family Ventures $1.3 million in 2022 and $1.8 million in 2021 for use of the aircraft.
Separately, Canoo also paid Aquila Family Ventures $1.7 million in 2023, $1.1 million in 2022 and $500,000 in 2021 for shared services support in its Justin, Texas, corporate office facility, according to regulatory filings.
This could be chalked up to small monetary potatoes if Canoo reaches its revenue forecast for 2024 of $50 million to $100 million.
We’ve asked Canoo for comment and will update this post if we hear back.
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