Deep Dive into Synthesia's $90M Funding for AI Deep Fakes

0:00Today on the podcast, we're going to be covering three major stories in AI. The first is the fact that some are saying$4.4 trillion is going to be added annually because of AI to the global economy. The second is that Synthesia, the video platform, has just raised$90 million in a Series C round. I'm going to break that down, what they're planning on doing with it, and some interesting anecdotal stories. The third one is that the EU has just passed some AI regulations. So we're going to break down what is happening in the EU with that regulation and where we expect to see that in the future. So the first report we're looking at is coming out of McKinsey.

0:37According to their most recent report, Generative AI has the potential to add around$4.4 trillion of value to the global economy every single year. And what's really interesting is this report also suggests that by 2030 to 2060, around half of all work could be automated. The power of generative AI has really accelerated this entire forecast compared to a lot of their previous predictions that they have made. The area McKinsey is saying will be disrupted the most, they say, is that this is really going to challenge the attainment of multi-year degree credentials. And that means that knowledge workers are probably going to be the people that take the biggest career hit in this situation.

1:16So that's really interesting. The next story we want to cover today is the fact that the EU has recently passed some AI regulation laws. And this is essentially just a draft law. So this is not necessarily in action, but they've made some pretty big strides because essentially they had a vote and the law's final version is going to now be negotiated in the different branches of the EU. And they're hoping to reach an agreement on this by the end of the year. Right. The EU definitely takes a long time to work on these kind of laws. And I mean, this is probably this one probably has some big implications.

1:47So I'm not, you know, criticizing the time too much necessarily. But I will say that one of the key takeaways on this is probably the fact that the proposed legislation essentially mandates pre-market assessments for generative AI systems like Chai Chibuti. And it also advocates for prohibiting real time facial recognition. now real-time facial recognition um i think that uh prohibiting that personally i'm gonna i'm a fan of i don't really like the idea that i could be walking around uh you know downtown and there's cameras that have facial recognition and determine who i am and what stores i'm walking into and then create some sort of profile on me based off of that i prefer the privacy um of course it'll be interesting to see if you know companies like banks or other things would uh use that in real time to try to assess threats uh there's a bunch of different like pros and cons and different use cases some people will argue for or against.

2:38In any case, the one that I think is really interesting, because this is one that has been talked about in the US, but the proposed legislation would mandate pre-market assessments for generative AI systems like Chai Chupiti, aka every time a new AI company wants to come out with a new product, they would have to have a pre-market assessment for this. Now, there's pros and cons to this. The pros are, you know, let's say there's a really dangerous AI system. And this is going to kind of slow down that AI system for from coming to market, or it's going to get flagged, or people are gonna be able to look at it and hopefully, you know, keep AI more safe.

3:13The con is, you know, a lot of people will say, if there's an AI that like, okay, so theoretically, like, let's say you create an AI, and it's like a super open AI, and it will criticize the government will criticize everything and everyone and it doesn't have a lot of checks and balances on it, right, for example, something like that, there's no way would ever get past a system like this. And so technically, for censorship and, you know, freedom of speech laws, you can imagine why some people before this and why the government would be against it, anything that would criticize them probably wouldn't get passed.

3:48So, you know, there's pros and cons. And we'll leave it up to the regulators and people in their jurisdictions to decide what happens there. But it'll be an interesting thing to follow. The third story we want to talk about today is the fact that Syntheza has just raised$90 million. And this is actually a very, very interesting raise because they said they weren't actually looking to raise money. They said they were a self-sufficient company. Apparently they have over 50 ,000 customers. They have a couple hundred employees. And so what's interesting about this is they actually launched back in 2017.

4:21There was a group of AI researchers that kind of put this company together. and since then they've grown it into a really powerful company if you've ever seen it before essentially you can go on there um you know you can type in a script and you can have a virtual ai person reading the script talking and they're on the screen and so this company is really useful i've used it for a number of different use cases myself a lot of people use this for like uh for you know explainer videos it's it's a lot more personable than just having like you know for example an ai voice it's a lot cheaper than having to have a actual person sit down in a studio and record record a video explaining something.

4:56So I think it has like it's a pretty it's a pretty good use case company of all the AI video companies. I think that they are number one. They're doing it the best. And of course, they're not perfect. The technology is new and it's getting better. When I looked at it, you know, a few, you know, I think six months ago or so, I was using it quite a bit. And I found they have like a whole bunch of different characters you can choose from from. But I found that there was only one that seemed like it had really been refined and polished and actually could be passable as humans, where the other ones were a little bit, you know, not quite as not quite as good.

5:31Now, I've seen this used in a lot of different ways. I've seen entire TikTok channels using the Synthesia. And there's like a person talking to, you know, the TikTok channel about all the different stuff. And it's literally just an AI person. So I think that it's it is definitely a very cool company. Now, what's interesting with this raise is that apparently this is our series C. they raised$90 million and it was led by a cell and Nvidia that Kleiner Perkins, GV, First Smart Capital, MMC. So I think what's really interesting is that is that this brings how much they've raised total to$156 million.

6:10And now their startup has hit a$1 billion valuation, which is up about 300 million since December 2021, meaning that a$700 million valuation in December 2021, which is when valuations by and large, like peaked. So a lot of companies, you know, they haven't been trying to raise money since. And a lot of companies have been expected their valuations will have tanked quite a bit, I think, with exception to AI companies that were, you know, pretty big, pretty powerful, and they're kind of industry leaders in their in their given niche. And, and now I think with the whole AI boom, those companies are going to see a big jump.

6:45And I do think it's like, you know, interesting, a lot of people would have like, it's not crazy to think that this company could have like 2x or 10x in that time. And so the fact that it's only up, you know, around 30 % since the end of 2021. So essentially, in the last year and a half, means that they did get a pretty good valuation when they last raised. And they're just I don't know, they're benefiting from the AI boom, for sure. Their CEO and co founder Victor Rebelli. He told TechCrunch that Synthesia is a sustainable business. They weren't looking for additional investment, but Accel and NVIDIA approached the company with a very compelling offer.

7:23In addition to those 50 ,000 customers I mentioned earlier, he said, we don't disclose revenue figures at this time, but the company has a year-over-year user growth rate of 456 % and over 15 million videos generated on the platform today. Something that's interesting, I mean, Synthecia's had a little bit of controversy around, you know, some people are worried that it's going to be used to generate deep fakes. Some people are worried that it's going to be used to sway, you know, elections and different things by creating content. I mean, at the end of the day, I don't see how it's that much different than just hiring a voice actor on Fiverr or somewhere else to read off a script.

8:02another thing that is interesting and important to know is the fact that synthecia doesn't just you know the people that are on there they're they're like avatars obviously are people that have signed the consent for them to you know create these ai versions of people and their actors that they've paid and gotten the rights and licenses to use their you know their image and whatever and so it's not like this is a platform that you can just upload anyone and create a talking head video or a deep fake of any person i did see in the past they had an off they had like a they had something that you could like a feature or a tool a product where essentially you could go to a studio and they had a special script that you would record in a special type of studio with a green screen and they would be able to take that recording that you do high def recording and they would be able to train an ai model for you so if you wanted to have an ai model of yourself uh talking and and you know be able to use that for your company or something else um they had that option i'm not sure if that's still available but i think in any case uh the likelihood of, you know, you know, the whole deepfake thing is not very likely considering that's not really part of their business.

9:06But what they do say is that they have an entire team that is kind of like they have a disinformation team, which essentially suspends accounts that violate their terms of service. And they currently prohibit political, sexual, personal, criminal, and discriminatory content. And they said that apparently this, you know, this big investment that they're going to be doing or they're taking on for the Series C, they're going to be putting towards making the avatars on the platform more expressive. And they're going to be making the whole platform more faster and more collaborative, which I'm assuming the collaborative is, you know, adding things like workspaces so that organizations and companies can kind of work together on the platform.

9:45I think it's really interesting to see from that use case, right? Like they're gonna, their avatars are gonna be more expressive, the platform is gonna be faster, it's gonna be more collaborative. They really didn't need to take this money. But I think they obviously got a really good offer from NVIDIA. And they saw this as an opportunity to grow. Now, why would NVIDIA approach a company and just offer to give them$90 million with a handful of other investors? I think right now in AI, we're seeing, you know, a new AI company, a new AI product coming out every single day. And I think these larger companies, you know, someone like NVIDIA, who's reached a trillion dollar market cap, they have a ton of new money that is being generated from this.

10:23And I think Nvidia specifically wants to plow their money into companies that are going to use more computing power and going to propel the AI industry forward because they know they're going to make a lot of money on the back end of increased AI use. So I think they're looking for the winners. They're looking for the current category winners, right? They don't have to go and find a brand new startup and hope it works out. They want to find someone that's already doing well, like Synthesia. They want to give them more money to just expand what they're doing, maybe do more marketing. And essentially, they just want Synthesia to use more computational power so that NVIDIA is going to be the winner when it comes to a lot of these chips and a lot of the infrastructure that propels these AI platforms forward.

11:05So I think this is a really interesting investment strategy for NVIDIA. I think this is also a good way for venture capitalists to find winners and put money into those as they know there's only a certain amount of AI companies that are going to become the mega winners from this AI boom. And so they are looking at people that are already ahead. Not to say some of these new and upcoming people won't be able to surpass or beat them, but this is kind of how they're hedging their bets at the moment. So I think it's going to be an interesting area to follow. I would be super curious to see if Synthesia sees any substantial product platform upgrades and changes.

11:37I remember a funny story. I used them maybe a year ago when I was actually getting them. I had a podcast that was an AI podcast. It was before I realized there was a bunch of platforms that you could just put a script in and have it just read and get an audio file. So I was making videos because Synthesia's audio was actually pretty good. Like it sounded very realistic. In any case, I made an account, I think it was, you know, 30 bucks a month or something. And it was at a time where they hadn't really set a limit to how much you could use it. So I went and created, you know, 30 podcasts in a week that were, I had a VA do it, but I had them create like 30 podcasts in a week.

12:15and each one was like, you know, five to 10 minutes long, reading these different scripts. And anyways, I got an email from Synthesia saying that they had shut down my account. And if so, pretty much when you create these, they're stored on their account, and we would download them and post them. So I'd already gotten the content off of it. And at that point, it literally did say that it was unlimited, but I guess they realized that unlimited wasn't very sustainable. So they changed their policy. In any case, they shut down my account and said that if I would like access to my account. I had to pay them$2 ,700 for the usage that week.

12:46So of course I found another platform, but I thought that was pretty funny. In any case, really cool company. They are doing well. I'll be curious to see if they can make some big strides in improving these models. I definitely think there's a lot of room for improvement. Um, and I'm hoping with$90 million, they're going to be able to make these things a lot more realistic and lifelike and, uh, more useful for businesses.