Midjourney has lots of issues. The platform is counterintuitive to use. It needs very specific prompts to generate great pictures. It’s paid and requires a subscription. And above all, the platform is neck-deep in the legal issues of copyright infringement. It looks like nothing is going its way and such a firm shouldn’t thrive in today’s AI market. Nonetheless, against all the roadblocks, the platform is the second-most popular in the generative AI space and the most popular in the AI image generator space. 

According to media reports, with a mere 40-member team the company is slated to rake in $200 million in revenue this year from the support of 15 million community members. 

Midjourney boasts of a remarkable revenue per employee of $5 million far surpassing the the likes of publicly listed SaaS companies like Dropbox ($595K), Slack ($240K), Squarespace ($493K), and Palantir ($310K), showcasing the company’s exceptional efficiency and profitability.

How Midjourney makes money

Midjourney generates revenue primarily through two channels—subscription fees and additional GPU time purchases. They offer various subscription plans, ranging from $10 to $120 per month or annually, granting users access to their AI-powered creative tools. Users pay based on their artistic needs and budget, allowing Midjourney to sustain and develop its platform while catering to individual preferences.

In addition, users can purchase extra GPU time at a flat rate of $4 per hour, ensuring uninterrupted creative work when they exceed their allotted GPU hours. This straightforward pricing model offers flexibility for users to extend their creative time as needed.

Midjourney has been appreciated for the sheer brilliance of the product that it is barring the additional fluff. A user on Linkeidn wrote, “No funding. No management layers. No B2B. Just discord and the excited public!”

Others acknowledged the competence of the individual/team behind Midjourney, emphasising their coding skills, timing, and strong work ethic—highlighting the distinction between genuine businesses and those that rely on empty promises. 

Another interesting point is that the platform has been able to achieve this huge revenue without VC funding. 

VC Averse

Many in the AI community ironically expressed surprise at a company prioritising profit over constantly raising money for an idea, hinting at AI startups like Mistral AI, amongst others who have picked up millions of dollars without a product in hand. 

Midjourney founder, David Holz has expressed scepticism about the survival of companies heavily reliant on venture capital, highlighting the cycle of burning through funds and seeking more investments, which Midjourney has avoided. While VCs also tend to be less reliable, they invest in a hype cycle and exit once the bubble bursts.

Venture capitalists have shown strong interest, but Holz has rejected their offers, citing uncertainty about capital needs. He’s determined to keep Midjourney self-funded, aiming for long-term sustainability. 

His bitterness also stems from his disappointing experience with venture capital in his previous startup Leap Motion—which raised over $100 million from investors but was eventually sold for just $30 million in 2019. 

Holz wants Midjourney to be “this weird thing that no one knows how to compete with that just sort of stands alone,” according to his own admission in an interview.

Prominent venture capital firms like Greylock Partners, Sequoia Capital, Andreessen Horowitz, Index Ventures, and Spark Capital have also shown a keen interest in investing in his new venture, but to no avail.

What Others Can Learn

Holz relies on his experience building AI teams at Leap Motion, which he believes distinguishes him from other emerging AI company founders. And it has paid off handsomely for him. The team of 40 has yielded better ROI than many huge corporations.

Another unconventional decision Holz has made is forging a partnership with Discord. 

While the platform is focused on the instant messaging platform, many have echoed caution, with individuals expressing scepticism about using Discord for business, due to perceived risks on a platform that lacks control and support. 

Others have also suggested that the business would have been even more successful without Discord’s integration. Nevertheless, despite the impending launch of a standalone website, Midjourney intends to maintain its strong presence on Discord, where millions of users engage with AI apps.

Midjourney believes that its Discord server has set it apart from other generative AI platforms, fostering a sense of community and collective engagement among users. Midjourney’s server has experienced significant growth, reaching 14.8 million users over the past year, becoming Discord’s largest server.

He runs the company differently from typical Silicon Valley startups, with few managers, no board of directors, and small, independent teams. Holz relies on external advisers including AI investor and former GitHub CEO Nat Friedman for guidance and opts to provide employees with a share of profits rather than substantial stock packages.

Holz has also assembled a team of familiar faces and advisers, including Bill Warner, the founder of Avid Technology and Leap Motion’s initial investor. Many employees, including the CFO Nadia Ali, come from Leap Motion. Other advisers include Jim Keller, the former chip designer at Intel and Apple, Philip Rosedale from Second Life, and Rich Miner, the co-founder of Android.

The company also keeps upgrading its product and has plans to release its sixth software version with improved technology by year-end. The company is also developing 3D art and video capabilities.

Midjourney’s journey indicates that an AI company with a vision and solid product, catering to the needs of its customers, instead of just relying on VC funding, can be successful.

The post Midjourney Shows the Way to Success without VC Funding appeared first on Analytics India Magazine.