On the Hunt for the Next Big Thing: Andreessen Horowitz’s $150 Million Investment in Character AI and the Rise of A.I. Tokens – A Supercycle of Trustworthiness

The hype cycle is always turning, and venture capitalists are always looking for the next big thing. This time, the bright stars at Andreessen Horowitz have turned their gaze towards the revolutionary tech of artificial intelligence. On Thursday, the firm announced a $150 million Series A investment in Character AI, developers of the AI chatbot. A16z, the venture capital firm headed by Andreessen Horowitz, led the round, with investment from Nat Friedman, Elad Gil, SV Angel, and A Capital. Sarah Wang, general partner at Andreessen Horowitz, also announced she would taking up a place on the Character AI board.

The announcement of the investment in Character AI was met with enthusiasm, and Wang was particularly optimistic about the possibilities for the chatbot. “If the internet was the dawn of universally accessible information, this moment in A.I. may very well be the dawn of universally accessible intelligence,” Wang wrote. “We are at the iPhone moment of A.I.,” said Wang. “Like mobile and the internet, the A.I. revolution starts with the consumer.”

Character AI was founded in September 2022 by former Google software engineers Noam Shazeer and Daniel Freitas and has seen its user base grow exponentially since then. Shazeer serves as the company’s CEO while Freitas acts as the President. The funds from the investment will be massively beneficial to the company, providing it with much-needed resources during its “hypergrowth phase.” Character AI looks to increase its user base by customizing its chatbot experience to each user’s preferences. Users have available to them bots based on Tesla CEO Elon Musk, Twitter CEO Jack Dorsey, Michael Jackson, and countless fictional characters such as Tony Stark and Saul Goodman.

The chatbot will be released with a disclaimer – “Everything characters say is made up” – but that isn’t the only type of AI on the rise in the blockchain industry. Smart contracts are obviously a feature of Web3, but A.I. tokens are also becoming part of the blockchain industry. Projects such as Hera, ALI, NMR, and AGIX are taking off, offering tokens that make use of A.I. to improve security, scalability and user experience. The global A.I. industry alone is estimated to balloon to $196 billion in 2023 and AI tech has become far more accessible due to OpenAI’s “ChatGPT” chatbot and investments from Microsoft.

The combination of blockchain and A.I. could lead to a level of trustworthiness never seen before. This potential is being explored by the authors of a recent paper from the Massachusetts Institute of Technology, Alex Pentland, John Werner, and Chris Bishop. The authors suggest that this could be a major societal transformation with blockchain and A.I. “becoming the next supercycle.” For those of us who remember the dot com bust and understand the perils of unbridled hype, this could perhaps be cause for cautious optimism.

The rise of A.I. tokens will bear watching in the coming months and years and the implications of this supercycle of trustworthiness are still unknown. But one thing is definitely true – when the titans of venture capital start throwing their weight behind something, we’d be wise to take note. Andreessen Horowitz’s decision to invest in Character AI shines a light on the future of A.I. and where the technology may go next – and the possibilities may be fairly endless.

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Chris Griffin
Chris has had a career as an advisor to the tech industry, incubating start-ups in the tech industry. Welcoming Chris to contribute his expertise covering the latest things he sees in blockchain