Character.AI Files for Chapter 11 Bankruptcy as Disney Leads $20M Asset Auction

What happened

Per TechCrunch's Oct 13 report, Character.AI's board determined the court-supervised sale 'provides the Company with the best opportunity to maximize value for all stakeholders.' Disney will also provide transition services through former Character.AI employees who joined the entertainment giant last month alongside former CEO Karandeep Singh Anand.

Current CEO Colin Adams said the company will keep operating during the sale, expected to close in late November or early December, while writing: 'We hope that the sale process will yield an actionable proposal that will allow continued operations of the Character.ai platform. If such a bid is unavailable, however, the platform will be wound down.'

Key facts

1. Five-year arc: Founded in late 2021 by Transformer paper co-author Noam Shazeer and Daniel De Freitas; unicorn in Sept 2022 on a $150M raise; in Aug 2024 Google struck a $2.7B licensing deal and both founders returned to Google.
2. Lawsuit headwinds: After a 14-year-old Florida boy's suicide, his mother sued alleging he became obsessed with a platform chatbot; Texas launched an investigation. The company settled some suits, added safety features and banned minors.
3. Funding and users: Per PitchBook the company raised over $193M from investors including Lightspeed, SV Angel, Greycroft and a16z; monthly active users hit 20M in Oct 2024.