Character.AI has filed for Chapter 11 bankruptcy after five years of operation. Court documents indicate the company holds assets and liabilities valued between $50 million and $100 million.
The startup has reached an agreement to sell specific assets to Disney for $20 million, including a non-exclusive perpetual license for its technology. Disney will also receive transition services from former Character.AI employees.
CEO Colin Adams stated that the company will continue operations during the court-supervised sale process, which is expected to conclude in late November or early December. No buyer has been identified yet.
Founded in 2021 by former Google engineers, the company raised over $193 million from investors including a16z and Lightspeed. Despite reaching 20 million monthly active users by October 2024, the firm faced legal challenges and difficulties in monetizing its platform.
