Leonardo Ai, a Sydney-based artificial intelligence image creation start-up, has quickly gained investor attention by generating US$1.6 million in revenue within five months. That puts the company on track to make US$5 million on an annualised basis.
These figures have led Blackbird Ventures — Australia's largest technology fund — to acquire a 20% stake in Leonardo and spearhead its next funding round.
The start-up boasts more than 3.6 million users and 28,000 subscribers. It has generated over 435 million images within eight months since its inception.
But the company faces notable challenges, including high churn rates and intense competition from US counterparts. Internal statistics reveal that of the 225,000 users who registered in April, only 15,000 remained active 11 weeks later. These metrics have led to scepticism regarding the start-up's claims of solid annual recurring revenue.
Despite its early success, there are questions whether companies like Leonardo should be considered as having genuinely recurring revenue, given the high levels of user drop-off. The company, founded by chief executive JJ Fiasson, offers a range of subscription tiers based on token limits due to the high computing power required for generating images.
Globally, investors continue to pour money into artificial intelligence start-ups. Microsoft (NASDAQ:MSFT) invested US$10 billion in OpenAI, and Amazon (NASDAQ:AMZN) committed up to US$4 billion for Anthropic. The surge in investment has sparked conversations about a potential bubble in the AI sector.