Compiled by: Felix, PANews

Privacy-focused AI startup Venice AI recently announced the completion of a $65 million Series A funding round. This round was led by Dragonfly, with additional participation from North Island Ventures, Coinbase Ventures, Archetype, Liquid2 Ventures, Morgan Creek, and other investment institutions.

Erik Voorhees, founder and CEO of Venice AI, revealed that this marks the first external financing for the company established in 2024, with a valuation reaching $1 billion. The new funds will primarily be used to purchase GPUs and build its own data centers, thus escaping the predicament of GPU leasing and improving gross margins. Additionally, funds will be used to develop customers, enter new markets, acquire incremental businesses, and hire top talent.

“Privacy First”, annual revenue exceeds $70 million

Unlike AI companies on the current market that commonly rely on intensive data collection and are in a loss-making state, Venice AI adopts "Privacy First" as its core competitive advantage, positioning itself as a private and uncensored alternative to OpenAI's ChatGPT.

Venice AI hosts "uncensored" open-source models in its own data centers and routes queries to closed-source models from companies such as OpenAI or Anthropic. All user inputs are encrypted and processed on the client side, routed through external proxies, then processed and returned; Venice’s own system does not store any data. It also offers end-to-end encryption for certain models, but this feature requires a paid subscription to access.

The project also places a strong emphasis on empowering users. Users can freely choose AI models capable of generating text, images, audio, and video. The performance, quality, and level of censorship of all these models vary.

Currently, Venice AI provides over 200 AI models. Since its inception, the company’s website has attracted over 850,000 unique visitors, with more than 3 million active users, processing an average of 1.7 million API calls daily. Erik Voorhees stated that by the end of the first quarter, the company has become profitable, with annual revenue exceeding $70 million.

Erik Voorhees, an early advocate of Bitcoin, has founded several crypto companies, including the Bitcoin gambling site Satoshi Dice and the crypto exchange ShapeShift, and has long advocated for user privacy protection.

8% of users make payments with cryptocurrency, “equity + token” financing structure sparks controversy

Venice AI has issued two cryptocurrency tokens. Last August, Venice AI launched a token named “DIEM”; to attract users, it introduced another token named “VVV” at the beginning of this January. Users can purchase VVV and stake it to mint DIEM, which generates $1 worth of AI credits daily for use on the Venice AI platform. However, Erik Voorhees pointed out that currently only about 8% of users use cryptocurrency for payments.

Data indicates that VVV has risen over 700% in value this year, and Venice AI currently holds over 30 million VVV, accounting for more than 37.5% of the total supply of 80 million, making it the largest holder. Regarding this financing round, Erik Voorhees disclosed that Venice AI chose to sell equity instead of directly liquidating VVV.

As a return on the $65 million investment, Series A investors receive 8.98% equity in Venice AI along with a series of rights tied to the native token VVV.

Specifically, investors received a vesting authorization that includes 1.5 million VVV tokens and warrants to purchase an additional 5 million VVV tokens within the next eight years. If investors exercise these warrants in the future, they would need to pay Venice AI approximately $66.5 million, which could potentially raise the total financing amount to $131.5 million. Both the token authorization and warrants have a one-year lock-up period, after which they will unlock linearly over three years.

In terms of supply, assuming investors pay an additional $66.5 million to exercise the warrants, approximately one year after starting, nearly 6,000 VVV will be released to the market daily, which accounts for about 0.2% of the current daily trading volume. Voorhees also pointed out that Venice's token strategy remains unchanged, planning to continue using part of its revenue to repurchase and destroy VVV tokens while gradually reducing the token issuance volume.

So far this year, the annual emission of VVV tokens has been reduced from 8 million to 3 million after multiple adjustments. Officials stated that the goal is to achieve a net deflation of VVV, ensuring that the volume destroyed exceeds the volume emitted.

It's worth noting that some community members have expressed concerns and criticisms regarding this “equity + token” financing method. The core of the criticism is that equity holders enjoy legal protection and preferential dividend rights, while token holders solely rely on the company's commitment to “repurchase and destroy with revenue”.

Moonrock Capital founder expressed, “I am very optimistic about Venice as one of the few decentralized AI projects with solid fundamentals. However, when I saw the equity structure of VVV, I was extremely disappointed. It's inappropriate to set up separate shareholders for early supporters and token investors, as this inevitably leads to conflicts of interest and discrepancies in value accumulation mechanisms.”

Former Ethereum Foundation researcher Dankrad Feist stated, “The token equity allocation mechanism is terrible. The company has a legal obligation to maximize the value for equity holders. Assuming they have sustainable income of $100 million, I find it hard to argue that the best use of that income is to buy and destroy tokens, rather than distributing it in the form of dividends (holding a large amount of VVV doesn't change this).”

Crypto KOL XY also stated, “If the company's revenue grows from $70 million to $500 million, with most of the growth reflected in equity, then a mere few dollars in destruction won't address the imbalance in equity structure.”

However, the community voices are not solely complaints; some individuals maintain that the news of Venice’s funding has been overinterpreted: “Only real companies with real income, real products, and real leaders will seek financing for scaling expansion.”

In response, Erik Voorhees also replied that the ultimate value of the token will depend on: the revenue growth rate of Venice, and whether it can quickly repurchase and destroy VVV; user acquisition and infrastructure development; consistency of interests between equity holders and token holders.

Related reading: A look at the most volatile crypto assets in the past year and a half: Zcash leads in 2025, Venice leads in 2026

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