Kaon AI, a Berkeley, California-based start-up that builds personalised, generative-AI story worlds, has raised $60 million in its latest funding round, valuing the company in the several hundreds of millions. Backers included B Capital, Redpoint Ace, Goodwater Capital and DCM. The raise signals growing investor appetite for interactive AI entertainment, which one investor described as the "next distinct consumer category".

The company, led by chief executive Jay Dang, chief technology officer Alex Xi and chief operating officer Lifan Wang, is pivoting from its earlier FlowGPT product, once pitched as an "app store" for generative AI models. Its flagship consumer product, Emochi, lets users co-create characters and settings for evolving interactive stories, and Kaon positions it against rivals such as Character.ai by focusing on responsive storytelling rather than simulating individuals. Kaon says Emochi generates $45 million in annual recurring revenue and has more than 2 million daily active users, who spend an average of 150 minutes a day on the platform, with the US its largest market and a median user age of 23 to 25.