Character.ai Files for Bankruptcy

(theverge.com)

138 points | by yanis_t 4 hours ago ago

114 comments

  • schleck8 4 hours ago ago

    > Google spent over $2 billion to hire away much of the company’s talent, including co-founders Noam Shazeer and Daniel De Freitas, in 2024.

    • glimshe 3 hours ago ago

      That shouldn't have been a problem given that AI can fully replace talent. The whole company should in theory only have needed a dream and an Anthropic subscription.

      • Varelion 3 hours ago ago

        WOAH, SOFTWARE ENGINEERING IS DEAD! BUY MORE TOKENS!

        • inSumErgoCogito 3 hours ago ago

          Now i hear that in gandalfs moria voice: "Full of a Toke! Next time throw yourself after it into the wishing well!"

    • lelanthran 4 hours ago ago

      That's a long time ago. They should have been able to make a go of it in these hyped times.

    • dumberquestions 2 hours ago ago

      Well one of those two names was a core contributor to the Attention paper, arguably the top contributor, before leaving Google to make Character Ai, no wonder the re-hired him back (before he left again).

    • swyx 26 minutes ago ago

      how exactly did character.ai lose $2b in 2 years?

      • undefined 21 minutes ago ago
        [deleted]
      • sebzim4500 12 minutes ago ago

        Sounds like this money went to individual employees/shareholders and not the company itself?

    • nova22033 2 hours ago ago

      Same thing they did with windsurf

  • softwaredoug 2 hours ago ago

    EDIT - glad to hear that Character.ai employees did not get screwed, at least per a comment below

    ---

    I worked at a company in 2000s that was acquired. I had no stock but the owner still gave a generous spot bonus and a years salary bonus retention package to employees. Owners got life changing wealth, employees got a down payment for a home.

    It’s sad that this doesn’t seem to be the norm. Screwing employees on acquisition seems like a severe breach of social contract.

    • jonny_eh an hour ago ago

      What are you talking about? I was an employee in 2024 and I was not “screwed”. My options were converted into cash at the same valuation that Google paid (vesting schedule remained intact though). Noam did right by his employees.

      • softwaredoug an hour ago ago

        I stand corrected, I'm glad to hear that.

    • NDizzle an hour ago ago

      I had the same thing happen. Twice, actually - after the non-competes expired for the first acquisition, of course I accepted a position working for the same guy at the next company. Another successful exit there. These were small time, meat and potatoes type startup companies. Nothing fancy. The one thing I did post about here on HN, which I think was one 1) ahead of its time, 2) lacked investor connections, 3) we went with Oakland instead of SF DID flame out spectacularly. My part was the money from the first acquisition plus about 40% of my savings. Ah well. Gotta try it a few times. (still looking for the next opportunity)

  • gizzlon 4 hours ago ago

    I wonder what will happen to all the very personal and sensitive data they (probably) have on users?

    • Medea 4 hours ago ago

      Probably auctioned off, like what happened to Spirit Airlines: https://news.bloomberglaw.com/bankruptcy-law/google-aims-to-...

      • renegade-otter 3 hours ago ago

        It's unbelievable to me that this is legal. You put your trust into a corporate entity with your data. The entity goes away, so does the guarantee? Oh, OK.

        I learned that the hard way with 23&Me.

        • satvikpendem 2 hours ago ago

          > I learned that the hard way with 23&Me.

          That's why I've never done a DNA test, it's not worth your literal biological data being sold off to god knows where to discriminate against you. I thought everyone realized this but didn't realize it was a niche opinion.

          • c-linkage 2 hours ago ago

            It would have been nice if my siblings had the same opinion.

          • pfdietz 2 hours ago ago

            Has that discrimination scenario ever happened?

          • gregw2 37 minutes ago ago

            I hate to say it but fyi, don't give blood nowdays unless you read all the fine print they have an opt out policy you trust...

            • deltoidmaximus 12 minutes ago ago

              What are they doing when you give blood?

        • burnte an hour ago ago

          > It's unbelievable to me that this is legal. You put your trust into a corporate entity with your data. The entity goes away, so does the guarantee? Oh, OK.

          I agree it sucks but isn't that life? Jim makes you a promise, Jim dies, his kids don't have to keep Jim's promise, nor anyone else.

          • MisterMunchkin 36 minutes ago ago

            Mr Disney is long dead but we still can't cross the mouse.

        • naravara 2 hours ago ago

          My original mortgage lender has a very functioning web portal to set up autopay and check my account.

          They sold my mortgage to a big bank whose web portal and app are pure garbage. Constantly crashing, the autopay frequently just doesn’t autopay, and getting a statement history requires delving through a bunch of random menus.

          It’s really obnoxious that I just get no say unless I refinance.

          • delichon an hour ago ago

            Imagine buying a bond that you are not allowed to sell, and just have to wait for maturity. You'd pay less than for a normal bond, right? Same goes for a mortgage lender. They would risk less and you'd be paying a lot more for such a loan, if you can find one.

          • camdenreslink 36 minutes ago ago

            This exact thing happened to me. Went from an extremely nice bill paying experience to a buggy crashing one.

        • undefined 2 hours ago ago
          [deleted]
      • gazook89 2 hours ago ago

        > Google’s purchase doesn’t include personal data and privileged materials like Spirit’s 97.5 million passenger profiles or an estimated 50.2 million records related to the Free Spirit loyalty program data, according to court records.

      • GJim 2 hours ago ago

        It's the FUD spread by the AdTech industry (including here on HN by people who's salaries are dependent on invading our privacy) that is holding back sensible data protection laws in the USA.

    • cmiles8 2 hours ago ago

      It’s a company asset to auction off to the highest bidder now

  • thor-rodrigues 4 hours ago ago

    A lot of money moved through different hands, yet it doesn’t seems that nothing of value was created.

    I wonder how any of this makes sense.

    • scrollop 3 hours ago ago

      Have you peeked at how the (very complicated) financial markets work?

      Lot's of people staring at computers moving money and ious around complicated networks within complicated rules making money making money making money.

      Really progressing humanity forward :/

      • Sharlin 3 hours ago ago

        Replace the people with LLMs and we're well on our way to immanentizing the "Vile Offspring" of Stross's Accelerando.

      • nater5000 2 hours ago ago

        >Really progressing humanity forward :/

        You're using amazing technology funded through those financial processes to complain that those financial processes aren't progressing humanity forward lol. Modern AI is the perfect example of how financial systems are important for technological progression.

        Thinking complex financial systems aren't contributing to humanity's progress because you don't recognize how it is used to fundamentally support the work that progresses humanity is like thinking taxes are a scam because you don't recognize how much you actually benefit from taxes everyday.

        • xtracto 34 minutes ago ago

          It's sad that you are being downvoted, for what you say it's pretty correct.

          A lot of people don't understand the reason why financial markets were created and why they continue to exist.

          There's a really good book called "Against the Gods, the remarkable history of Risk" which gives a good account on an aspect of why financial markets exist.

          Basically, parts of society want to advance things (technology, arts, medicine, etc) but that same part doesn't have to carry the risk of doing their project. Financial markets are there to transfer the risk to people willing [able] to take on it.

          Credit and Risk are two tools that have influenced the progress of civilization so much, its crazy.

          Sure, there are people that abuse financial markets, the same way there are abusive people in Tech, Arts, or any other human endeavor. But that should not disqualify the whole system.

    • schleck8 4 hours ago ago

      This seems reductive. Character.ai has > 20 million monthly active users, and a lot of company valuation happens on the basis of user count (which is legitimate, that's not vaporware)

      • thor-rodrigues 4 hours ago ago

        I have the impression that if MAU by itself was sufficient, the company wouldn’t have had to file for bankruptcy.

        Obviously the company failed to convert its MAU into paying users, despite the fact the token costs greatly declined over the last years.

        • embedding-shape 2 hours ago ago

          Why don't they just not count token costs at all (or any other cost-per-user) and only look at profits, like what Anthropic is doing to figure out if they're profitable?

      • PxldLtd 4 hours ago ago

        I disagree that it's reductive. If each user costs more in API tokens then your company isn't valuable. That's what everyone's been screaming from the rooftops about there being a bubble. We certainly use tons of AI at the company I work for, if we were paying full API prices then I would bet we'd be barely using it.

        • phillipcarter 2 hours ago ago

          There's always enterprise wheeling and dealing to keep something discounted, but enterprises are absolutely paying API prices for tokens. For AI coding a least, the issue is more about attributing tokens to a real backlog (no leeching tokens for side projects) and keeping things from running away, both of which all the major AI coding platforms offer solutions for.

      • skeeter2020 2 hours ago ago

        webvan and pets.com have entered the chat.

        • sebzim4500 10 minutes ago ago

          Did pets.com really have 20 million monthly active users? What were they using it for?

      • irl_zebra 3 hours ago ago

        As we saw after the hero Zelenskyy took down Yandex data centers, user count seems to be vaporware in many cases.

        • gaiagraphia 2 hours ago ago

          I'm seeing this repeated a lot, but I'm rarely seeing the evidence to back it up. Presumably you're not speaking about Yandex's search engine crawlers here, right?

          In an internet full of metrics and graphs, it's odd that nobody's bringing anything to the table and is just repeating the meme. A bit bottish in itself, tbh.

          If it turned out "usercount was vapourware" due to 3 Russian data centres getting btfo, I think there'd have been a global financial crisis underway as we speak.

          • HarHarVeryFunny 6 minutes ago ago

            I don't see any connection to Character.ai, but it's pretty obvious that Twitter is 90% bots, politically leaning heavily in same direction as Twitter's owner, whose pro-Trump interests are aligned with those of Russia.

            Where all all these bots being hosted? I have no idea, but it certainly would not be surprising to find many of them coming from Russia (Yandex). Twitter must at least know the IP addressees of these bot accounts, but does nothing to stop them. Perhaps they are actually run by Musk not Putin, who makes no attempt to hide his attempt to use his position to subvert American democracy.

      • cicko 2 hours ago ago

        A drug dealer at the corner also has lots of active monthly users.

        • sebzim4500 10 minutes ago ago

          Not 20 million he doesn't

    • post-it 2 hours ago ago

      It seems like a lot of people enjoyed using the product. Isn't that value?

      • miltonlost 2 hours ago ago

        Not when the product creates psychosis in people and makes them lonelier and sadder than before and encourages them to starve and cut themselves. Where is the value in this? https://www.reuters.com/legal/litigation/characterai-chatbot...

        • debugnik an hour ago ago

          It's a roleplay app, an AI version of the old RP forums, or RP private chats. Anyone sane and slightly mature understands they're not being encouraged to do anything IRL. The main problem I see here is a lack of parenting.

    • jansport123 3 hours ago ago

      the rich in society (corps, individuals) are so absurdly rich that they can keep throwing money till something sticks with almost 0 risk. If you believe AI is something civilizationally transformational which it is resonable to believe, then why not throw some money at it.

    • Ekaros 2 hours ago ago

      But lot of numbers went up. And that mean lot of other numbers went up. Which means "wealth" for many went up. And they got bonuses paid.

    • roncesvalles 3 hours ago ago

      A valuable company wasn't created in the end, but all kinds of value spewed out of this endeavor. The co-founders almost certainly walked away filthy rich. A few hundred people got 6-figure paychecks. A few early investors probably made a profit selling to greater fools.

      It is rumored that their last round valued them at $6B.

      • skeeter2020 2 hours ago ago

        accrete means grow or make larger/greater; this is the opposite were a bunch of value moved around, some was lost (from an efficiency / opportunity cost perspective) and a bunch was concentrated into the hands of a few. That's not value growth.

        • roncesvalles an hour ago ago

          True, I meant to say value was ejected from this i.e. there were some peripheral winners. I had a totally wrong definition in my mind of the word "accrete" (I was linking it to accretion discs around black holes).

    • SpicyLemonZest 2 hours ago ago

      The US just has a lot of venture capital money running around. It's common for biotech companies to raise about as much as Character.ai (although typically at lower valuations) and then never end up launching a successful product. From a societal perspective, it's valuable to be able to search the space of long shots; from a funder's perspective, the rewards of a good investment are high enough to pay for a lot of bad ones.

    • turing_complete 3 hours ago ago

      welcome to the world of VC startups

    • PxldLtd 4 hours ago ago

      Get with the program, numbers go up = ai valuable. Don't look any closer, details are the AI's problem now.

  • hirako2000 2 hours ago ago

    So many job openings for a company going under.

    https://jobs.ashbyhq.com/character/

    • zamadatix an hour ago ago

      It reads like they didn't go under yet, they just expected to with the way the legal challenges were going. As part of that, Disney seems to hope to be taking a good portion (all?) of the employees in the sale. Without keeping staffing up, the sale might not have been viable. If they didn't have such an exit plan involving the employees still being around then it might have made more sense to freeze hiring and ride it out until the end or whatever option would make sense in that story.

      • hirako2000 an hour ago ago

        They aren't under yet.

        Keeping jobs up after filing for chapter 11 seems irresponsible though.

        • zamadatix an hour ago ago

          Seems fine so long as they are really transitioning those roles to Disney as part of the Chapter 11. Not sure if they are or aren't for each of those listings - if you are that'd be interesting to hear.

          I've been at a company that went through Chapter 11 and still work with (at the new place) a few folks hired during that time.

    • NDizzle an hour ago ago

      Removing their fake job postings is low on the priority list. Same with the other companies and their fake job postings...

  • karahime 3 hours ago ago

    I think it's unfortunate that this is the case and that the service has been treated unfairly in many regards, but c.ai has faced specific problems that other businesses in the space don't, and the basic service isn't going to be marketed towards the more revenue-generating segments like enterprise without making something different out of it.

    • Schlagbohrer 2 hours ago ago

      What were those specific problems they faced? I haven't paid any attention the market for cloud-based AI services by all these non-frontier companies, but I know it's a big market

      • DiggyJohnson 26 minutes ago ago

        Mostly playing devil’s advocate here but if the McDonald’s app glitched and showed a popup claiming to be a licensed psychiatrist I don’t think they would be liable for the consequences for any self harm that happened to me because it’s unreasonable.

        Not my best wording for the metaphor but why would a company specialized in creating fictional personas for individual users be liable if their fictional personas pretended they had real advice.

        Aka how is this different than telling the doctors and the police that a horse told you that you would be hexed if you didn’t try and rob the store?

      • user43928 an hour ago ago

        I heard about various lawsuits, including one where apparently Pennsylvania alleges that a literal AI character has claimed to be a licensed psychiatrist inside of a chat, after the user asked.

        It sounds ridiculous to me.

      • mingus88 2 hours ago ago

        I have never used it but the reputation it has in my bubble is that kids just used it to goon to Disney characters

        So the problem is your customers don’t pay for anything and your content is unlicensed

  • hypfer 2 hours ago ago

    5 days ago:

    Character.AI chatbots encouraged users to cut and starve themselves, Kentucky alleges

    https://www.reuters.com/legal/litigation/characterai-chatbot...

    • donbox 2 hours ago ago

      Agreed, IMHO this might be the real reason.

  • writtenone 2 hours ago ago
  • hisfraudulency 2 hours ago ago

    It was always odd to me that talent like Noam Shazeer was working at a company with such a gimmicky premise to begin with.

    • donbox 2 hours ago ago

      Well, he founded it!

    • miltonlost 2 hours ago ago

      Sometimes talent decides to just make money and scam people into thinking talking with AI versions of celebrities as something worthwhile and positive for the world.

  • forgetme2020 2 hours ago ago

    The CEO and left a week ago. he must have been among the first to see this coming.

  • undefined 2 hours ago ago
    [deleted]
  • xg15 2 hours ago ago

    And nothing of value was lost...

    (well, except investment money I guess)

    • jonny_eh an hour ago ago

      They have no investors, afaik

  • agnishom 2 hours ago ago

    Will this kick off a wave off bankruptcy of companies with morally bankrupt ideas?

  • TomGarden an hour ago ago

    This service is the ground zero of AI psychosis and children talking to chatbots as if it's their friends/lovers.

    I'm surprised Disney wants anything to do with it, then again, they wanted to integrate Sora into their streaming offering. Oh, how the mighty have fallen

  • seydor 2 hours ago ago

    I had no idea there is a Morality Court

  • undefined 3 hours ago ago
    [deleted]
  • paaloeye 3 hours ago ago

    Boom and bust cycle in startups is so short lately!

  • ChrisArchitect an hour ago ago
  • undefined 3 hours ago ago
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  • mschuster91 4 hours ago ago

    And so, it begins. The first domino has fallen.

    I'm gonna go, grab some popcorn and cry a few tears... tears of joy.

    • LanceJones 44 minutes ago ago

      Fallen? The founders and about 30 researchers took a $2.7 billion exit from Google in 2024.

    • dumberquestions 2 hours ago ago

      I had a conversation with someone some time in 2024 about Character Ai, wondering how something so obviously exploitative could exist, one data point to consider.

    • Krasnol 3 hours ago ago

      I don't know if there is something to be joyful about.

      AI won't go away, it will just end up being a monopoly.

      • FromTheFirstIn 3 hours ago ago

        A monopoly on not making money

      • ActionHank 2 hours ago ago

        I don't think I know of anyone who denies the value of AI. I think 95% of the people who use it know that it is a tool and are angry / dismayed / confused about companies that are parading it around like a drop in replacement for anything.

        Photoshop is a tool, vs code is a tool, git is a tool, excel is a tool. No one expected these to autonomously generate money.

        People will be happy that the 5% who are delusional are going to be forced to reckon with the lies they've told themselves.

        As an aside, I believe there will be a huge surge in crypto hype again once these sorts of get rich quick with AI schemes dry up.

        • mschuster91 an hour ago ago

          Crypto always has been backed by the natural demand of drug consumers, drug dealers and drug sellers. Now with marijuana being somewhat legalized in more and more parts of the world and everyone being able to see that the war on cocaine is all but lost... I think the demand for crypto will not recover any more.

          • ActionHank 17 minutes ago ago

            It's also an incredibly convenient way to move a huge amount of wealth around without the tax man taking a look.

  • baggachipz 3 hours ago ago

    Is there this implosion's version of fuckedcompany.com?

  • rvz 2 hours ago ago

    You realize that the investors already got their exit after Google bought off the founders and some of their staff?

    They knew it was going to $0, so the now the employees at this "employee owned" Character.ai got themselves scammed.

  • Soliddune16 3 hours ago ago

    [flagged]

  • jdw64 3 hours ago ago

    [dead]

  • jp0001 3 hours ago ago

    Good. Let this be a warning to shit companies with shit products and shit business models.

    • ramesh31 3 hours ago ago

      >"Let this be a warning to shit companies with shit products and shit business models."

      ...that you can be a shit company with a shit product and a shit business model and still make a shit ton of money and get hired by Google?

      • jp0001 3 hours ago ago

        It’s a good idea. The three things I said still stand.

  • 0gs 4 hours ago ago

    calling this a domino is pretty funny. "the first tiddlywink has spontaneously disintegrated"

    • lelanthran 4 hours ago ago

      It only takes a pebble to start a landslide.

      Most pebbles don't start landslides, but almost all landslides started with a pebble.

      Remember that almost all the "value" in AI companies right now is based on perception, not reported profits.

      • m4rtink 3 hours ago ago

        So Character.ai is Jay Cooke & Company ? ;-)

        https://en.wikipedia.org/wiki/Panic_of_1873

        • 0gs 3 hours ago ago

          wow tontines are fascinating! fwiw, i just meant that c.ai was a domino before it got hollowed out by an acquipoach

      • mingus88 2 hours ago ago

        Pets.com became the emblem of the dot com bubble. Obviously there was a fortune to be made in online retail but they didn’t have it

        Will c.ai be the pets.com of this bubble?

    • freecodeio 2 hours ago ago

      I mean a famous AI company filing for bankrupcy might get some investors to hold their breath, given how also OpenAI and Anthropic aren't profitable.

    • aardv44rk 3 hours ago ago

      [dead]