The business was once valued at $1 billion. It just filed for bankruptcy.
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Character.ai, the pioneering consumer chatbot once valued at $1 billion, filed for Chapter 11 bankruptcy protection Monday as it grapples with user safety concerns and a high-profile copyright dispute with Disney, which has emerged as a $20 million lead bidder for the startup’s assets.
Founded in 2021, the San Francisco-based company said its artificial intelligence platform will continue operating as negotiations continue.
“Over the past year, we’ve taken meaningful steps to sustain and improve our business amid significant legal, regulatory, and operational headwinds,” the company said in a blog post. “After a comprehensive review of our available alternatives, our board determined that this court-supervised sale process provides us with the best opportunity to maximize value for all of our stakeholders.”
Serving as the lead, or “stalking horse,” bidder, Disney is offering $20 million for certain Character.ai assets and a nonexclusive license to some of the company’s intellectual property.
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Character.ai said it expects the transaction to conclude by late November or early December.
The bankruptcy marks a dramatic reversal for one of the earliest breakout successes of the generative AI boom.
Founded by former Google researchers Noam Shazeer and Daniel De Freitas, Character.ai lets users chat with virtual personalities based on fictional characters, celebrities, historical figures, and user-created personas. The company reached a $1 billion valuation roughly a year after raising $150 million from investors.