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, aims to expand into Europe and Latin America after looking at positive results in the U.S. market.
The company has now raised $196 million across multiple rounds with a valuation of $750 million, TechCrunch has exclusively learned.
TechCrunch reported last year that the company was in talks with Lightspeed to lead the funding round that it announced today.
How does the platform work?
Pocket FM offers audio series with several short episodes and aim to become the “Netflix for audio” globally. Users can listen to some series or episodes for free and unlock others by purchasing coins. Instead of adopting a subscription-based approach to let users access all content, Pocket FM has found that the pay-as-you-go model is more suitable for the company.
This doesn’t lock in users in a payment cycle. But if a user wants to listen to more content they have to buy coins — like buying level-up items in a game.
Last month, the company said that it plans to invest $40 million into its Wattpad-like writing platform Pocket Novel. Last week, the company’s co-founder Rohan Nayak posted on LinkedIn that more than 90,000 writers had signed up on the platform since February 20. Pocket Novel also pushes users to buy coins to unlock content.
While both apps have a coin-buying mechanism to unlock content, there is no integration between them at the moment. That means you can’t use the coins you bought on Pocket FM to unlock content Pocket Novel products and vice versa.
Pocket FM also has a limited audiobook vertical where it competes with the likes of Audible with a similar pay-to-unlock strategy. The company is running this product only in India with existing partnerships.
Numbers game
Pocket FM typically optimizes for users spending more time on the platform. To that end, the audio platform has more than 100,000+ hours of content and over 400,000 episodes across genres and languages.
The company’s U.S. expansion in 2021 has proved to be a major revenue driver. It said that Pocket FM has crossed $150 million ARR this year — with a $100 million ARR contribution from the U.S. The company is present in other markets, but it counts the U.S. and India as its biggest markets.
The platform has also seen a high level of engagement from its U.S. user base. While globally, users are spending 115 minutes on the audio platform, that average goes up to 135 minutes in the U.S.
The Pocket Novel writing platform, which has local competitors like Omidyar Network-backed Pratilipi, has more than 250,000 writers onboard.
Efforts in GenAI and the creator economy
It is not surprising that Pocket FM is keen to try out generative AI-based features. It has already started testing a tool for writers in the U.S. to convert their writings into audiobooks. The company is working with Eleven Labs to provide writers with an array of 50 AI-powered voices.
The startup noted that it is also internally working on AI-powered tools that will help creators write their stories faster.
While Pocket Novel writers earn through a revenue share program, the startup provides incentives for hitting writing goals. But using AI tools that often generate unreliable or low-quality output means there is a lot of mediocre content on the platform.
Rahul Nayak, CEO of Pocket FM, told TechCrunch that essentially it is a platform’s job to filter out the noise.
“You need to filter out the noise and make sure you filter out the high-quality content which you then make available to listeners. The way we see AI at least in our context, it’s more about how you use AI to unlock productivity and efficiency gains for creators for writers,” he said.
Pocket FM says that some writers on the platform earn more than $3,000 per month but it didn’t give information about average overall income. The company doesn’t enforce an exclusivity clause when creators are onboarding the platform, but the startup said that it has some deals in place to own the IP.
Future plans for investment and expansion
Separately, the company is already talking to investors for its next round. Abu Dhabi’s sovereign wealth fund ADIA has held talks with Pocket FM for a potential mega funding round, TechCrunch reported last week.
The company didn’t directly respond to that development but said it has received significant investor interest.
“As you’re scaling you see a lot of investor interest generally. But whether it is the new round or not depends on sort of our scaling plan and depends on something materializing,” Nayak said.
Nayak also mentioned that the company is not profitable yet, but it has a high gross margin and is focusing on scaling. The startup has around 800 people and plans to add 500 personnel across the globe.