Inworld Raises New $50M Round, Hits $500M Valuation for Conversational NPCs

Generative AI is about to arrive in gaming at scale

Inworld announced another “$50M+” funding round led by Lightspeed Ventures, with participation from Microsoft, Intel, Founders Fund, and others. The company says the new funding round brings the company's valuation to $500 million (aka half a unicorn or halficorn 🦄).

Crunchbase data show that Inworld’s total funding to date is $120 million. The total is certainly more. Full details and total round size were not disclosed, but I was told directly that it was more than $50 million.

Nasdaq says the cash infusion makes Inworld the best-funded AI & Games startup. The AI element is used to animate non-player characters (NPCs) in games and enable them to carry on humanlike conversations with the human game players. According to the announcement:

Inworld’s technology goes beyond existing large language models (LLMs) and chatbots, allowing developers to power AI-driven non-player characters (NPCs), bringing depth and realism to characters, and rendering them within the logic and fantasy of their worlds. AI NPCs exhibit complex and lifelike human behaviors, increasing immersion for players. Going beyond dialogue trees with conversational AI is just the start. 

Conversational NPC Momentum

Inworld has gained a lot of momentum since raising its first $7.2 million funding round in December 2021, another $10-12 million in March 2022, and launching its first product the following month. Co-founders Ilya Gelfenbeyn and Kylan Gibbs appeared on the Voicebot Podcast on the launch day and discussed the idea behind making games and metaverse spaces more engaging with autonomous interactive characters.

That product launch was followed by the company’s participation in an accelerator run by Disney, and another $50 million funding round in August 2022. Inworld also participated in another accelerator run by NBC Universal earlier this year.

The new funding arrives with additional details of Inworld customers such as NetEase, Niantic, and LG U+, along with some community mod games to well-known titles like Skyrim and Grand Theft Auto. There is also an initiative around open-sourcing some elements of Inworld software, but no details are available as to the scope or impact of that program.

There is a specific story here about Inworld’s momentum coupled with a larger story about the market momentum behind interactive NPCs. NVIDIA announced its Avatar Cloud Engine (ACE) for Games in May and featured conversational NPCs based on Convai, a startup founded in 2022 by Purnendu Mukherjee. Mukherjee is a former data scientist and deep learning engineer at NVIDIA.

Pitchbook data show Convai raised $5 million in funding in December 2022 and its first product was introduced in March 2023. Convai appears to have customers already and a growing list of YouTube influencers using the software to create characters. The company has so far refrained from making any announcements, but it is worth noting that Convai is a generative AI native software solution.

Generative AI broadly and large language models (LLM) specifically are driving big funding rounds and high valuations across industries. However, gaming is a particularly interesting segment. It brings together many different generative AI elements, such as language, images, synchronization, and spatial computing. Interactive characters (i.e., NPCs) that can hold humanlike conversations is one place where all of these technologies come together.

You should expect to see more announcements and more momentum in this segment. Inworld’s $500 million valuation is based on an expectation that adoption of AI-powered NPCs by game makers will be swift. You should also expect to see use cases outside of gaming emerge for companies such as Inworld and Convai.