Photoroom: The $50M/Year Background removal tool

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Hi 👋, this is the Today in AI Newsletter: The weekly newsletter bringing you one step closer to building your own startup.

We analyze a cool, industry-shaping AI startup every week, with a full breakdown of what they do, how they make money, how much they’ve raised, and the opportunity ahead. 

Let’s get to the good stuff in this email: 

• This AI startup is making studio-quality photos accessible to everyone

• They’re doing over $50M in ARR profitably, up 50x in the last 3 years

• They’ve just raised a $43M Series B at a $500M valuation led by Balderton Capital

So what’s the startup and who are the founders behind it? Here’s the story of Photoroom 📈

Photoroom was founded in 2019 by Matthieu Rouif and Eliot Andres in Paris with the mission to make studio-quality photos accessible to everyone in the world.

It’s an AI-based photo-editing app that’s already been used to promote the Barbie Movie, and even one of Taylor Swift’s new albums. 👯‍♀️

Their software uses deep learning to translate pixels into objects, simplifying technical tasks like removing a background so you can focus on the creative parts. 🤖 

What makes Photoroom so special is that it was initially made for online sellers. It helps remove the backgrounds for product images and even replaces them with AI-generated backgrounds with the click of a button.

Photoroom has also focused on building its own models from nothing, which speeds up image generation for users by up to 40% compared to other AI visual platforms.

How did Matt and Eliot start out? 👶

Matt’s journey started at Stanford, where he did his Masters in Materials Science and Engineering in 2009.

Matt was super passionate about building apps, and dedicated his career to doing just that for the first 5 years out of University.

This included building apps for world famous Ski resorts in France, Italy, Switzerland, Spain, and Andora which were eventually acquired by SkiPlan. ⛷️

He then went on to work as head of product for a startup: Stupeflix, a photo and video editing app which were eventually acquired by GoPro.

Eliot on the other hand was super technical. He’d done an engineering degree, then a masters in CS engineering, working on web data management and deep learning.

He then went off to work at multiple startups as a software and deep learning engineer, mastering Tensorflow 1 and 2. He even wrote a whole book on Computer Vision! 👨‍💻

One day, Stupeflix was being featured on the Apple App store and needed some artwork to submit the next day. Their designer was off that day, and since they had a small team, Matt decided to try and do it, having had previous experience using photoshop.

He opened his computer with a clear vision of what he wanted to design but he just couldn't do it. 😕 There were too many options on what he could design and nothing he tried designing was what he had in mind.

This is when it clicked. 💡 

What if you could use AI to edit photos? No one had tried it yet and it seemed so obvious. There was a big opportunity here. 🚀 

In 2019, Matt left GoPro to start Photoroom with Eliot and they began to hustle…

Early Beginnings of Photoroom 👀

The 2 founders quickly built out an MVP for a background removal tool for businesses (mainly e-com), so they could start shipping it out as soon as possible.

They wanted to iterate fast, and learn faster.

To bring on users in the earliest days of the startup, they had something called the McDonalds test. 🍔

Essentially they’d offer to pay for people’s food at a McDonalds to download and test out Photoroom, then see how they’d use it, ask some questions, and get feedback.

This allowed them to get an idea of how to keep improving Photoroom, while bringing users in at the same time. 🔁 

Matt says he did this so much that he got banned from the McDonalds next to their office!

“Do things that don’t scale.” - Paul Graham (Co-founder of Y Combinator)

By 2020, Photoroom was scaling fast, reaching hundreds of thousands of users, and had achieved Product-market fit. 

Gary Vee along with a few eBay influencers talked about Photoroom on their platforms. A month later, COVID hit which just accelerated growth like crazy.

It officially started going viral. 📈

This is also when they got into Y Combinator, who invested $125K to fuel their growth even more.

They ended 2020 with $1M in ARR. 💸

By 2022, Generative AI had started to take off, taking Photoroom to a whole other level.

They started seeing what AI image/video generators like Dall-E and Midjourney were able to produce. They knew the photos edited by Photoroom could be similar quality or even better.

The startup, to this day, ships out new features and versions every week, constantly making the app better after listening to user feedback.

Stats 📊

💸 Fast forward to 2023, Photoroom did $50M in ARR profitably, up 50x in 3 years. They’re already on track to doubling that to $100M in ARR this year.

☄️ The Photoroom app now has over 150M downloads with 5M+ monthly active users, with over 5B images processed annually.

💰 With their latest funding round in Feb 2024, Photoroom raised a $43M Series B at a $500M valuation, bringing their total raised to $64M. The round was led by Balderton Capital and Algae Ventures with participation from YC, Meta, Yann LeCun, Zehan Wang (Co-founder of Magic Pony) and more.

They currently have just over 50 employees, which they plan to double by the end of this year.

💳 So far, big names like Shopify, Netflix and Warner Brothers have integrated Photoroom’s API directly into their websites to generate product images.

🧬 They’ve also been featured by Apple as one of the most innovative apps in recent years.

🚀 To this day, Y Combinator has said that they’ve never seen a company grow this fast with such little capital, making it one of YC’s most capital-efficient startups.

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