The Future of Images: How AI is Revolutionizing the Mobile Industry
Apps that allow users to capture, manipulate, and share images have been among the most popular and successful mobile creations. However, with the rise of AI technology, a new wave of startups is entering the scene.
One such startup is PhotoRoom, based in Paris, France. Utilizing AI, the company has developed a highly sought-after image editing app and API, catering to e-commerce businesses, media professionals, and more. Its impressive capabilities even extend to powering personalized Barbie promotional posters. And now, PhotoRoom is preparing to secure a round of funding.
According to multiple sources, the startup is currently in the process of raising between $50 million and $60 million at a pre-money valuation of $500 million to $600 million. In a time where AI is a hot commodity, but overall funding is restricted, PhotoRoom has caught the attention of investors, successfully opening up their checkbooks.
While the full list of investors is still unclear, sources believe that Balderton, who led the previous funding round, is also leading this round. Other existing backers are expected to join, along with new investors. “They are choosing between different term sheets,” one source shared.
Besides Balderton, other existing supporters include Adjacent, Kima Ventures, FJ Labs, Meta, Y Combinator (where PhotoRoom participated in the Summer 2020 cohort – the first remote batch due to Covid-19), as well as numerous angels such as Yann LeCun, Zehan Wang (formerly of Magic Pony and Twitter), executives from Hugging Face and Disney+, and many others. This round would bring PhotoRoom’s raised capital to $70-80 million.
Neither PhotoRoom nor CEO Matthieu Rouif (who co-founded the company with CTO Eliot Andres) commented on funding-related inquiries. Balderton also declined to comment on the matter.
Paris has emerged as a vital city for AI development, with several small startups and significant players setting up headquarters there. These include Meta, with its large AI lab run by Yann LeCun; Hugging Face (now based in NYC); and Mistral AI, a company valued at $2 billion that is ambitiously building Large Language Models (LLMs) with the intention of keeping them open-source.
PhotoRoom’s success also reflects other current trends sweeping the tech industry, going beyond the current hype around AI.
Over the years, cameras have become the fundamental feature of smartphones, arguably even more critical than basic phone functions. Yet, most of the profits from this trend have gone to consumer apps and their ecosystems. What sets PhotoRoom apart, at least for now, is its primary focus on B2B use.
PhotoRoom initially found its niche market among small businesses, e-commerce vendors, and resellers. These users were looking for quick, user-friendly, and cost-effective photo editing software that could produce high-quality results for individual images or batches. With PhotoRoom, users can easily remove backgrounds from images and apply various effects, with some of them activated by voice commands. Clients utilize these edited images in their online sales listings on platforms like Depop, eBay, and Poshmark.
But the company’s API has also garnered attention from significant global clients. Warner Bros used PhotoRoom’s API to create a social media campaign for the Barbie movie last summer. Fans were able to crop their images and insert them into personalized Barbie posters, generating over one million shares, according to PhotoRoom.
Besides Warner Bros, other big players like Netflix and online food delivery startup Wolt have also tapped into PhotoRoom’s tools for various use cases.
Another aspect of PhotoRoom’s success (especially in these times) is its ability to generate revenue through its B2B focus.
The app offers a freemium tier, allowing access to a limited set of features for a particular number of images at no cost. However, PhotoRoom also offers various pricing tiers for different countries (in the UK, the basic Pro mobile version costs £3.99/week or £69.99 per year). There are different rates for web users, Shopify customers, larger businesses, and for utilizing their API.
Together with its expanding features, PhotoRoom’s business model has helped the company achieve incredible growth. According to Data.ai, in the U.S., PhotoRoom’s iOS app currently ranks third among all graphics and design apps. For the past three months, it has persistently ranked within the top ten, often securing the top spot. On Android, it is currently the number one photography app in the U.S.
Even SimilarWeb reports impressive numbers, with over 27 million monthly web visits in December 2023, an 18% increase from the previous three months. However, the majority of PhotoRoom’s traffic and usage come from mobile app users, accounting for almost 90% of the total.
As of December last year, PhotoRoom had surpassed 100 million downloads of its apps since its launch three years ago and was on track to achieve $50 million in annual recurring revenue (ARR).
The excitement around generative AI has also captured the attention of investors on the lookout for the next big thing.
In September last year, following the increased interest in gen AI driven by ChatGPT, consumer partner at Andreessen Horowitz, Olivia Moore, published research on popular generative AI apps.
The report ranked PhotoRoom as the sixth most popular generative AI product. While ChatGPT held the top spot by a wide margin, Moore’s main takeaway was that the industry is still in its early days. She wrote, “Most categories of apps are still up for grabs, and within the popular segment of AI image-based tools, apps like PhotoRoom, in her opinion, have a shot at success.
“Products built specifically for particular use cases or workflows are growing alongside more general tools, showing signs that they, too, can become successful companies,” added Moore.
In response to a request for comment, a PhotoRoom spokesperson directed TechCrunch to the a16z research report. However, they did not confirm if Andreessen Horowitz is one of the investors in the company. TechCrunch has reached out to the firm for more details.
