Toronto-based Wombo, which has gained popularity for its ability to turn selfies into videos of users lip-syncing to popular songs, has announced approximately $12.2 million CAD ($9 million USD) in funding to launch more generative artificial intelligence (AI) entertainment products.
The all-equity round was led by an existing backer, Round13 Capital’s Digital Asset Fund (Round13 DAF), with participation from a slew of new investors, including chip giant Nvidia, AI cloud provider CoreWeave, SBI, and Web3.com. Wombo plans to use this capital to expand its 10-person team, accelerate its product development efforts, and “explore new frontiers in AI-powered content creation.”
In the less than four years since the consumer AI startup’s launch, Wombo’s apps—which today include viral text-to-image generator Wombo Dream and selfie-to-political meme creation tool Wombo Meme—have collectively surpassed more than 200 million downloads.
Wombo’s apps, which today include Dream and Meme, have collectively surpassed more than 200 million downloads.
But despite the company’s traction and investor excitement about the promise of generative AI, the past few years have not all been smooth sailing for Wombo, which founder and CEO Ben-Zion Benkhin said entered ‘cockroach mode’ and began focusing on survival back in 2022 after a collapsed financing, shut down its original app due to copyright issues last year, and recently dodged a proposed class-action lawsuit alleging it violated privacy law.
With the changes Wombo made during this time and fresh funding fully closed, the startup’s outlook is a bit different now. “The company is profitable, this new investment round took place, and new and exciting things [are] on the horizon,” Benkhin told BetaKit in an interview.
Round13 DAF managing partner Khaled Verjee told BetaKit that he has “been very impressed with the team’s ability to execute, ship product on time, and consistently deliver high-quality, user-friendly applications which attract a strong and sticky user base.”
Benkhin said Wombo’s latest funding round closed earlier this year, but declined to share when exactly, whether it included any secondary capital, or disclose what valuation it gave the company. Wombo is not classifying this round, which brings the company’s total funding to more than $15 million USD. Benkhin noted that it “didn’t neatly fit what we imagined a seed or Series A might be.”
Wombo’s last publicly announced funding was a $6-million USD seed round it secured shortly after its launch in 2021 from Global Founders Capital, Ashton Kutcher’s Sound Ventures, the CEOs of Product Hunt and Machine Zone, Launch House, and Germany’s 468 Capital. That round valued Wombo at $40 million USD.
In March 2021, Wombo launched its first, self-titled app, which used AI to create lip-sync videos from user selfies. That October, Wombo rolled out its text-to-image generator Wombo Dream. Both took off, garnering more than 100 million downloads combined that year, and Google anointed Wombo Dream its best app of 2022 in the United States.
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On the heels of this rapid growth, in March 2022, Wombo thought it had closed another funding round. But according to Benkhin, the lead of that deal, which he declined to disclose, pulled out after two months of due diligence and the financing fell apart, right as tech market conditions were beginning to deteriorate.
The timing was unfortunate for Wombo, which Benkhin said was left with “essentially negative runway” since its app was going viral and it had a “million-dollar server bill” to foot as it faced down a more challenging fundraising environment. “We literally had no money,” he added.
“The market conditions were definitely a big factor,” said Benkhin. “Look, they got spooked … I don’t hate them for it. It probably would have been easier for my life if they didn’t do it, but sh-t happens, we move on, we live to see another day.”
Since then, Benkhin claimed that Wombo has dug itself out of that hole. Between 2022 and the end of 2023, Benkhin said Wombo set its sights on trying to survive and reach profitability. Two years ago, Verjee said Wombo closed a small bridge round that brought on Round13 DAF as an investor.
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According to Benkhin, during this period, Wombo did not conduct any layoffs for the purposes of cutting costs, but the startup did reduce its spending, boost its revenue by rolling out premium tiers and advertising for its up to that point largely free apps, and became profitable this year. “Luckily, we had ample room, ample product space with which to monetize,” he said.
“Ben-Zion is incredibly resilient and has shown amazing grit as a CEO through some pretty difficult times,” former Global Founders Capital partner Alex McIsaac—now of Northside Ventures—told BetaKit. “I’ve been very impressed since I invested at seed.”
In 2023, Wombo launched Wombo Meme and shut down its original app due to copyright issues. Copyright law poses a threat to Wombo and other AI companies, including fellow Toronto startups such as Viggle, Ideogram, and Cohere. Artists, musicians, writers, and others have claimed infringement based on content generated by AI, while companies training their AI systems using images, written material, and other data scraped from the internet have been operating in a legal grey area.
Asked how Wombo is navigating the potential for its tech to facilitate copyright infringement, Benkhin said, “We’re not pirates. We’re not in the business or philosophy of infringing, and so our intention is to do things in a legally compliant way.”
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To date, Wombo has amassed a big user base as a fun tool for messing around on the internet, but the tech underlying AI-generated images and videos, also called deepfakes, can also be dangerous. At its worst, it can be used to power misinformation (including of the political kind), non-consensual pornography, and scams.
It also raises other concerns. This summer, Wombo became the subject of a class-action lawsuit claiming its apps collected and shared Illinois users’ face scans without consent. BetaKit has reached out to Wombo for comment regarding this. On September 9, following the publication of this story, this lawsuit was dismissed.
Amid what has become a competitive consumer AI space, Benkhin views Wombo’s “hits-driven approach” as a differentiator, and at minimum, a viable short-term strategy. “Creativity is the edge, and you need to be fresh and new, and coming up with interesting new concepts that people like,” he added, noting that the startup wants to make “a few hits a year.”
“Ben-Zion is incredibly resilient and has shown amazing grit as a CEO through some pretty difficult times.”
Alex McIsaac
Verjee said that having compute providers Nvidia and CoreWeave as investors gives Wombo access to “a tremendous amount of knowledge, know-how, and access to cutting-edge resources which would not otherwise be available” as it looks to execute on these goals.
For his part, Benkhin noted that Wombo has a “rich technical and business collaboration with both companies” but declined to elaborate further.
Benkhin’s vision for Wombo also involves investing in research and development for “w.ai,” a project aimed at creating “the world’s largest AI supercomputer.” With w.ai, Wombo hopes to turn idle smart devices, such as MacBooks, smartphones, and PlayStations, into AI workers. The startup hopes to allow users to contribute computing power and earn rewards. Verjee noted that w.ai aims to do this with the help of Web3 infrastructure.
How this might work in practice remains unclear, as does how exactly what Wombo is doing connects with the world of cryptocurrency. Speaking to Round13 DAF and Web3.com’s involvement, Benkhin noted that while there is not currently any crypto in Wombo’s existing offerings, the company is “forward-thinking” when it comes to Web3.
“Crypto, we’ve always kept an open mind to, and said that when and if it makes sense, we will bring this to our products and to our users,” Benkhin said.
Feature image courtesy Kate Dockeray.