The artificial intelligence picture editor PhotoRoom is seeking $50–$60 million at a value of $500–$600 million

Some of the most popular smartphone apps of all time have allowed users to capture, edit, and share photographs. A fresh slew of firms are jumping into the fray as a result of the AI inflow.

A Paris, France, company called PhotoRoom created a well-known AI-based picture editing tool and API aimed at e-commerce merchants, media professionals, and others. (It even powers a website where users may create their own Barbie poster.) Has learned that the business is currently finalizing a fundraising round.

The business is reportedly seeking $50–$60 million in funding, with a pre-money value ranging from $500 million to $600 million, according to several sources. In a sector where artificial intelligence is trending but overall investment is tight (and some prestigious VCs, like Coatue, are actually pulling out), PhotoRoom has been making waves—and cashing money, it seems.

Nobody knows who all the investors are. According to one source, Balderton is once again heading the startup’s funding round. It was stated that new investors were taking part and that several former supporters were as well. “They are choosing between different term sheets,” one insider added.

Adjacent, Kima Ventures, FJ Labs, Meta, Y Combinator (where it was a part of the Summer 2020 cohort, its first remote batch after COVID-19), and a slew of angels like Yann LeCun, Zehan Wang (formerly of Magic Pony and Twitter), Hugging Face, Disney+ executives, and countless more are among the current backers, joining Balderton. If this round ends at these amounts, PhotoRoom will have raised a total of $70–$80 million.

PhotoRoom and its co-founder, CEO Matthieu Rouif, together with CTO Eliot Andres, choose not to address any inquiries about finance. Attempts to reach Balderton for a comment about this article were unsuccessful. Some others requested anonymity.

Located in what has become an important hub for artificial intelligence research, Paris is home to PhotoRoom.

Meta, run by Yann LeCun, has a sizable artificial intelligence lab there; Hugging Face, which is now located in New York City, originated in Paris; and Mistral AI, which is now worth $2 billion, is ambitiously constructing fundamental large language models, which it intends to remain open source.

Beyond the present trend surrounding artificial intelligence, other currents are sweeping across the computer industry and contributing to PhotoRoom’s ascent.

The camera on a smartphone has grown in importance over the years, to the point that it now surpasses even the most fundamental phone functions. However, consumer applications and platforms have reaped the majority of the benefits from that development. For the time being, at least, PhotoRoom is primarily positioned as a business-to-business tool, which helps it stand apart.

From its inception, PhotoRoom attracted a large number of small businesses, e-commerce vendors, and resellers seeking affordable, user-friendly, and high-quality photo editing software. The program allowed users to quickly remove backgrounds from images and apply various effects, some of which could be generated by word commands, without sacrificing speed or ease of use. Customers post the photos for sale on websites like Poshmark, Depop, and eBay.

More than that, PhotoRoom has attracted a group of large clients via its API. During the summer, Warner Bros. ran a social marketing campaign for the Barbie movie using the API. The campaign allowed fans to build customized Barbie posters by cropping their own photographs and inserting them. More than one million people shared the tool and the posters it generated, according to PhotoRoom.

Among the many companies using its technologies for a variety of purposes are Warner Brothers, Netflix, Wolt, an online meal delivery service, and many more.

Its reputation in the IT community has grown as well.

 

In order to maintain greater control over those photographs and prevent copyright difficulties in the future, PhotoRoom has built its platform on its own vision models, trained on its own data. It integrates third-party LLMs with these using tools like Dust, allowing for the creation of additional features. To illustrate the point, last year the business improved its “instant backgrounds” function with GPT-4 by adding suggested scenarios that could be created using word prompts. The business isn’t stopping there; last week, it improved its API by introducing a shadow feature.

 

Not only does PhotoRoom have an ever-expanding feature set, but its B2B emphasis has allowed it to solidify its development around a revenue-generating business model, which is particularly crucial at the moment.

 

A freemium tier is available for the software, allowing users to access a subset of functions and apply them to a small number of photographs without paying. The most basic Pro tier on mobile in the United Kingdom is £3.99 per week or £69.99 per year; however, this varies by nation. Additionally, its API, Shopify clients, bigger businesses, and online users all have their own unique pricing structures.

Since the time it secured $19 million in its most recent round in 2022, PhotoRoom has been seeing explosive growth.

Its iOS app has been consistently doing well, sometimes even topping the charts, in the United States, its most important market, according to data.ai. At present, it ranks third among all graphics and design applications in this space. At the moment, it’s the most popular photography app in the United States on Android.

Almost 90% of the app’s traffic and use occurs via mobile app, according to SimilarWeb, which puts the monthly web visitor count at just over 27 million as of December 2023, with data climbing over the three months previous by more than 18%.

In December, the firm informed us that, in the three years since its debut, the number of app downloads had surpassed 100 million and that the business was on pace to achieve annual revenue recognition of $50 million.

Not everything is easy, however. With dozens of alternatives and competitors, PhotoRoom faces stiff competition in the business photo editing tool market. Some, like Picsart, have raised nearly $200 million, while others, like the significantly smaller Pixelcut, have raised only $250k (according to PitchBook).

Yet, when the water level rises, vessels are lifted. Among investors seeking the next big thing, generative AI has generated a lot of interest.

Last September, after the interest in generative AI’s meteoric rise following ChatGPT, consumer partner Olivia Moore of Andreessen Horowitz released a study that tallied up the most downloaded generative AI applications.

As far as generative AI products go, PhotoRoom was placed sixth in the survey. Unsurprisingly, ChatGPT was the most popular gen-AI product overall, but the most important thing to remember is that this sector is still in its infancy. She said that the future of most app categories is still uncertain, but that applications like PhotoRoom, which focus on artificial intelligence picture processing, have a good chance of succeeding.

“Alongside more generalist tools, products that are purpose-built for specific use cases or workflows are growing and showing signs that they can also become successful companies,” Moore said.

When asked to respond, a PhotoRoom representative referred TC to the a16z study, but she wouldn’t confirm or deny if a16z is an investor. Like you, we reached out to a16z to inquire and will keep you posted here with any new information.