Jasper AI, an early pioneer in generative AI SaaS applications, has cut its internal valuation by 20% amid slowing growth, according to former employees notified of the change.
The reduced valuation could signal that growth has stalled for Jasper's AI writing tool aimed at marketers. This follows Jasper's Series A funding round last year that valued the company at $1.5 billion. The company gained attention last year partly thanks to OpenAI's natural language technology which enabled its product.
Clients like Airbnb and HarperCollins used Jasper's AI writing tool to automatically generate blog posts and other marketing copy based on text prompts. With most customers paying $80 per month, Jasper's recurring revenue doubled in 2022 to $80 million.
However OpenAI's launch of ChatGPT in the fall created a formidable low-cost competitor practically overnight. As a result, Jasper began pivoting its business from a mix of individual consumers and companies to focus on marketing teams at midsize and enterprise startups.
Jasper told investors in January it expected $90 million in annual recurring revenue (ARR), a key metric for subscription businesses. It projected $140 million ARR by end of 2022 and $250 million by end of 2024. But this summer, Jasper revised its 2023 ARR forecast down by at least 30%, per sources familiar with the matter. The company also conducted layoffs in July.
By lowering internal share value, Jasper reduced the worth of employee equity compensation. While an internal valuation differs from one set by outside investors, it can indicate a company's future external valuation. Jasper's new per-share value suggests its total valuation may now be approximately $1.2 billion - a noticeable decline as valuations for other AI startups continue rising.
The recent executive shake-up at Jasper reflects these challenges. Yesterday, CEO and co-founder Dave Rogenmoser stepped down, succeeded by former Dropbox president Timothy Young. Rogenmoser will remain on as Chairman of the Board. This summer also saw the departure of several key business figures, including their Vice President of Product.
In a post on X, Rogenmoser was frank about his transition, and expressed optimism about the company's evolution over the last year into a more mature AI co-pilot for marketing teams. Underlining this sentiment, he shared, "We’ve become a platform mid-market and enterprises can trust with on-brand, high-performing marketing content."
The swelling valuations of AI startups recently have displayed an atmosphere of unbridled optimism, with many companies reaping the rewards of investor enthusiasm for the cutting-edge technology. But Jasper's recalibration serves as a poignant reminder that investors must evaluate business models, not just technical promise.
The lesson is twofold. First, while the allure of high returns in the AI sector is undeniable, a rigorous due diligence process remains essential. Understanding a startup's unique value proposition, its differentiation from competitors, and the depth of its technological innovation is crucial.
Second, patience is key. The evolution of AI is ongoing, and today's frontrunners might be tomorrow's also-rans. Investing in this space requires a long-term perspective, recognizing that the journey of technological maturation has as many valleys as it does peaks.
Their first-mover advantage and substantial war chest may help Jasper weather the storm as generative AI goes mainstream. But with OpenAI, Google and Anthropic ramping up model capabilities at breakneck speed, Jasper faces an uphill battle to regain momentum.