India-based audio platform Pocket FM has secured $103 million in Series D funding led by Lightspeed Ventures with participation from Stepstone Group. The company, which counts Tencent and Times Internet as backers, is looking to expand into Europe and Latin America after seeing positive results in the US market.
The company has now raised $196 million across multiple rounds at a valuation of $750 million, TechCrunch has learned exclusively.
TechCrunch reported last year that the company was in talks with Lightspeed to lead the funding round announced today.
How does the platform work?
Pocket FM offers audio series consisting of several short episodes and aims to become the 'Netflix for audio' globally. Users can listen to some series and episodes for free and unlock other series and episodes by purchasing coins. Instead of taking a subscription-based approach that gives users access to all content, Pocket FM realized that a pay-as-you-go model was a better fit for the company.
This ensures that users are never locked in within a payment cycle. However, if users want to listen to more content, they will have to purchase coins, similar to how you purchase level-up items in a game.
Last month, the company announced plans to invest $40 million in Pocket Novel, a writing platform similar to Wattpad. Last week, the company's co-founder Rohan Nayak posted on LinkedIn that more than 90,000 authors had signed up to the platform since February 20th. Pocket Novel also encourages users to purchase coins to unlock content.
Both apps have a coin purchase mechanism to unlock content, but it is not integrated at this time. This means that coins purchased on Pocket FM cannot be used to unlock content Pocket Novel products and vice versa.
Pocket FM is also limited in the audiobook space, competing with the likes of Audible with a similar pay-to-unlock strategy. The company is running this product only in India through existing partnerships.
numbers game
Pocket FM typically optimizes for users who spend more time on the platform. To that end, the audio platform has over 100,000 hours of his content and over 400,000 episodes across genres and languages.
The company's U.S. expansion in 2021 proved to be a major revenue driver. Pocket FM announced that it has surpassed $150 million in ARR this year. The ARR from the US is $100 million. The company has expanded into other markets, but its largest markets are the United States and India.
The platform also receives high levels of engagement from its US user base. The amount of time that users around the world spend on the audio platform is 115 minutes, while in the United States the average reaches 135 minutes.
The Pocket Novel writing platform has local competitors such as Pratilipi, backed by Omidyar Network, with over 250,000 authors. The company aims for Pocket Novel to hit his $100 million annual revenue run rate (ARR) by 2025.
GenAI and creator economy initiatives
It's no surprise that Pocket FM wants to experiment with generative AI-based features. Authors in the US have already begun testing tools to convert their works into audiobooks. The company is collaborating with 11 Labs to provide writers with his 50 AI-powered voices.
The startup said it is also internally working on AI-powered tools to help creators write stories faster.
Pocket Novel's writers earn money through a revenue-sharing program, but the startup offers incentives to reach their writing goals. However, the use of AI tools that often produce unreliable or low-quality output results in a large amount of mediocre content on the platform.
Nayak told TechCrunch that it's essentially the platform's job to filter out the noise.
“We need to cut through the noise and make sure we filter out high-quality content to make it available to our listeners. At least the way we think of AI in our context is how we use it to help creators and It’s about how we make writers more productive and efficient,” he said.
Pocket FM says some writers on the platform earn more than $3,000 a month, but does not provide information on average income overall. The company does not enforce exclusivity clauses for creators to join the platform, but it does have some agreements in place to own IP, the company said.
Future investment/expansion plans
Separately, the company is already in talks with investors for the next round. TechCrunch reported last week that Abu Dhabi sovereign wealth fund ADIA was in talks with Pocket FM for a potentially large funding round.
The company did not directly respond to the move, but said it had received significant interest from investors.
“As we scale, we generally see an increase in investor interest. But whether it's a new round or not depends on the kind of scale-up plans we have and if something It depends on whether it materializes or not,” Nayak said.
Nayak also said that although the company is not yet profitable, it has high gross margins and is focused on scaling up. The startup has about 800 employees, and he plans to add 500 employees worldwide.