New York-based startup ElevenLabs has made a significant leap in its business, closing a $250 million Series C funding round at a valuation of between $3 billion and $3.3 billion, according to multiple sources. This substantial investment, led by ICONIQ Growth, comes just a year after the company's sizable $80 million Series B in January 2024.

The rapid growth of ElevenLabs can be attributed to its innovative AI audio technology, which has been gaining widespread adoption across various industries. The company's synthetic voice technology, including voice cloning and dubbing tools, has been used in numerous applications, from multimedia to gaming. This has led to a strong funnel of business, with investors scrambling to invest in the company.

ElevenLabs' founders, Mati Staniszewski and Piotr Dabkowski, childhood friends from Poland, were inspired by the poor quality of dubbing in American videos they watched growing up. They saw an opportunity to leverage AI to develop a better solution, and their idea has proven to be a clear example of right idea-right time. As generative AI services have become more advanced, multimedia has come to the fore, and there has been a growing interest in building applications that include sound and video alongside GenAI text services.

The company released its first beta product in January 2023, and by the time it had raised its Series A of $19 million in June 2023, it had gone viral. Although some of its growth has been accompanied by controversy, with stories of fake news being created with its tech, ElevenLabs has developed a raft of detection tools and other safeguards to prevent misuse. This has enabled the company to emerge as a key partner for enabling speech-based services for a high-profile number of businesses.

ElevenLabs' technology, usable via an API and priced at a number of usage tiers, covers a wide range of use cases, including translating text to speech (in multiple languages), cloning voices, changing voices in an audio track, creating entirely new voices, and other voice editing tools. The company's customers include technology platforms like Syntheisa, publishing giants like Washington Post, Harper Collins, and Bertelsmann, as well as gaming companies, among others.

The rapid rise in sales has led to a significant increase in annualized recurring revenue (ARR). In October, sources reported that ElevenLabs' ARR had grown from $25 million in 2023 to $80 million. Two people in November estimated that its ARR was likely closer to $90 million. If the latter figure is accurate, a $4 billion valuation would have put its valuation multiple at 44 times ARR; in the end, it seems the deal has been done at a slightly more moderate multiple of 37 times ARR.

For context, investors appear willing to pay as much as 50 times ARR for the fastest-growing generative AI companies. Anysphere, the maker of a popular AI-coding assistant Cursor, has received multiple unsolicited offers valuing the company at about $2.5 billion, which translates to about 52 times ARR. However, by the time the deal was announced earlier this month, Anysphere had reached $100 million in ARR, implying that the company was valued at 25 times ARR.

ElevenLabs' more temperate multiple may be a function of the company's competitors, which include a plethora of startups but also giants like Google and OpenAI. Other past backers of the company have included Sequoia, Credo Ventures, Concept Ventures, Salesforce Ventures, Disney, and nearly two dozen high-profile angel investors.

The massive Series C funding round solidifies ElevenLabs' position as a leader in AI voice technology, enabling the company to further develop its innovative solutions and expand its reach across industries. As the demand for AI-powered audio applications continues to grow, ElevenLabs is well-positioned to capitalize on this trend, shaping the future of multimedia and beyond.