Inkitt, the self-publishing platform that uses artificial intelligence to create bestsellers, raises $37 million.
Every person has a story inside them, as someone famous once said. A startup called Inkitt believes it can use artificial intelligence to turn the strongest of them into blockbuster movies and create a new “Disney” for the 21st century based on that content. Now, it has raised $37 million to back that ambition.
The company's eponymous app allows people to self-publish stories and then, using artificial intelligence and data science, selects the ones it believes are the most engaging to tweak and then distribute and sell on a second app, Galatea.
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Its business has already attracted 33 million users and dozens of bestsellers, the company said. The new funding, a Series C, will be used to expand the type of content it produces: using artificial intelligence to write stories based on your original ideas and to produce versions of its fiction that are personalized for specific readers. It also plans to move into games and audiobooks, as well as more video content coming from its literature platform — video produced with humans today but, eventually, also created using artificial intelligence.
The long-term vision, says CEO and founder Ali Albazaz, is to expand its content library and create a multimedia empire around it. Less of a competitor on the lines of Wattpad and more of “the Disney of the 21st century,” as he calls it.
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The $37 million, a Series C, is led by Vinod Khosla of Khosla Ventures. Previous investors including NEA, Kleiner Perkins and Redalpine, along with other undisclosed investors, also participated.
The investment brings Inkitt’s total raised to date to $117 million (other rounds included a $3.9 million seed, a $16 million Series A, and a $59 million Series B). It has already been approached by at least one issuer for an acquisition, and while there are few examples of consumer-focused companies raising capital, we understand that investors are already approaching for another round, should Inkitt choose to do so.
For now, this current Series C values Inkitt at around $400 million post-market. For some context, when it raised its Series B, it was valued at around $390 million, so while the valuation has increased, it may have been a more cautious deal (which is not surprising given the general climate for funding and for funding consumer-focused companies). Inkitt’s ambitions are, in some ways, an interesting departure from the publishing industry’s zigzag.
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With the rise of mobile phones and apps designed to take up a few minutes (or sometimes much more) of consumers’ free time, reading has declined over the past two decades. In 2022, the most recent year recorded by the Bureau of Labor Statistics, the average American adult read just about 15 minutes a day, down from about 20 minutes a few years ago. The average number of books read (and finished) has also fallen to about 5.
Inkitt is bucking this trend while, paradoxically, embracing it. It believes it can attract more meaningful reading time and engagement from its users by focusing on more innovative ways to deliver books, creating chapters that are shorter and easier to read on mobile devices, and incorporating enough effects (like sounds) throughout the text to make the reading experience more dynamic.
It also makes books more relevant to readers’ preferences. It runs A/B tests on every aspect of the work, from titles and story plot to first lines and endings. This gives Inkitt a wealth of data not just about specific books, but also about how fiction generally performs and what performs best—lessons it immediately applies to subsequent books that are published.
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All of this seems to be paying off. Some services that thrived during the height of the Covid-19 pandemic – “instant” deliveries, online shopping, virtual events and streaming everything – have slowed down, or at least returned to more subdued growth patterns, in recent years. Not so for Inkitt, Galatea and the company’s newest product, Galatea TV, which have all seen an increase in engagement time.
“People have so much going on right now,” Albazaz said of the post-pandemic years. “They’re looking for an escape, and we think that’s why we’re thriving.”
He said that Inkitt, overall, ranks as the 11th best-selling publisher worldwide, above well-known names like Penguin Random House, claiming that its algorithms give it a “20x” higher success rate than traditional publishers for publishing a best-selling book.
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Revenue has doubled in the past year (though he won’t reveal an actual number). And while newer projects like Galatea TV are more of a spin-off of the book, they’re generating big profits on their own. A TV series based on Galatea’s book Beautiful Mistake alone has generated $500,000 in revenue, he said. The company is, he added, “almost profitable.” The royalties, he said, are higher than what more traditional publishers typically pay to lower-profile authors, but he declined to give specific numbers.
Inkitt, founded in Berlin and now based in San Francisco, focuses on fantasy — but it wouldn’t be entirely accurate to say it’s targeting literary fiction. In fact, after a famous author who tried the platform a few years ago left in disgust and frustration after Inkitt suggested a series of edits for an upcoming novel of his, Albazaz said Inkitt prefers to avoid the hassles of working with big names and big egos in order to focus on the long tail of undiscovered talent.
It will be interesting to see how willing the long tail is to bend to the will of the algorithm. Albazaz said that AI-generated stories, based on compelling scenarios created by talented people, are a very important part of what he hopes to do more of in the future, along with personalizing stories using AI algorithms.
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Personalization is still a work in progress, he added, with Inkitt testing various levels of changes it could apply to an original project, or even giving control to readers themselves.
To realize this vision, the company has experimented with several LLMs, including APIs from OpenAI, Anthropic, and Mistral AI (the company's current favorite for shorter snippets, Albazaz said) for constructing narrative text, and has built its own adaptations around them, he said.
Each book is also automatically published in 10 languages: DeepL is the main AI used for this purpose. It uses ElevenLabs’ advanced for audiobooks, and currently Leonardo for the cover (a recent change from Midjourney, he said). The main idea seems to be to stick to a mix to ensure the best result.
“These LLMs are writing very bad to mediocre content,” he said. “The point is that LLMs alone are not capable of creating best-selling content. That’s where we come in with the data we’ve collected over the last few years.”
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Interestingly, there’s also an intellectual property reason behind this: Inkitt doesn’t want to rely on any single LLM for a full-length novel because, even if the platforms insist they have no intention of using the data exclusively to train their models, Inkitt prefers not to take any risks, he said. (To that end, he sometimes asks very deliberate questions, to avoid teaching the LLMs too much about Inkitt’s best works.)
Even while navigating these difficult waters to avoid drowning, the startup has clearly found some opportunities to stay afloat. Its focus and interest in creating AI-powered automotive content helped the company secure its lead investor. Vinod Khosla wrote late last year about how he believed the future of entertainment would be hyper-personalized, making Inkitt’s mission (and its success so far) a close fit.
Vinod himself declined to be interviewed for this story, but he did provide a statement: “With the advent of AI, entertainment could be rich and personalized,” he said. “Inkitt is doing just that with stories, creating content that is hyper-personalized and meaningful to each person.”
Information source: techcrunch.com
