A company called Morello has just raised 41 million from Index and A16Z to solve one of AI video's biggest problems, and that is not having sound effects, background music or audio in the background of AI generated video clips.
Today on the podcast, we'll be diving into the state of AI video generators and what this company Morello, plans on doing with their 41 million in this seed round that they have just raised.
Who gave it to them what the plan is and where the market goes in the future?
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All right, let's get into the show.
This is an interesting company, and I also think that it's an interesting problem.
And while I'm not saying that Morello is, you know, going to be completely struggling as a company, they do have a lot of headwinds.
So they have just raised $41 million.
This is their seed round.
It was led by A16Z and Index Ventures.
So obviously they're getting a lot of VC funding that's going into it.
Earlier this year, this is a company that was based in Berlin. but they just released SFX v1.1.
So essentially this is an AI model that it watches a video you upload to it and then it's going to add synced sound effects to the model.
To be honest, I think this is something that's really impressive.
But the headwinds will be facing are from Google and a lot of other AI labs that are already including sound effects into their videos that are being generated.
Now, this wasn't the case when this company first started out.
But today that is the case.
So the new money that they've raised, they said it's going to help them to compete against Google and other people.
They've been in stealth mode for a very long time.
And when they were in stealth mode, they didn't have a ton of resources.
There was a bunch of other companies, Sony, Tencent, they released video to sound effect models.
Also Kuaishu, who is owned by Kling AI out of China and Eleven Labs.
They've all released models that do the same thing.
And so, while Morello is different from them because it's a lot narrower of a focus, a lot of those other companies they're doing more of, like the sound and the audio.
And right now Morello is just focused on the sound effects.
So I saw a demo video where it's like a girl walking in the snow and you can kind of hear like the wind blowing around her and the crunching of the snow under her feet.
And so, and it was, you know, it lined up with her footsteps in the video.
So you could hear the crunch of the snow as her feet made a step.
And to be honest, it was like, this is a great tool.
This is a great value add.
I see this as being very valuable.
But the question is is this not going to be something that a lot of these other video generators have baked in?
Now, I think the argument for Morello really succeeding is if...
AI companies can't figure out how to do that, and they use the API of Morello and just plug it straight in.
If the video companies do that but I tend to think that they are they're going to get there.
According to the CEO, they expect their startup to double or triple their head count.
Right now, they have a team of only 10 people, so raising 40 million dollars with a team of 10 is very impressive.
Their CEO is CJ Simon Gabriel and they've been working on this out of Berlin.
As I mentioned, all All of the new hires are going to support their RD.
They also have product and go-to-market strategies that they're working on.
And they've recently published their models on fal.ai and also Replicate.
And they expect the API usage to drive most of the revenue in the short term.
So this isn't something that they're expecting users to go and use a lot of.
They're really expecting companies that are interfacing with AI video generators to kind of plug these two things together.
And now I will like I know.
Earlier I said I expect a lot of AI video generating companies do this themselves.
But in the meantime, I mean you have to like, I think, I have to give them their flowers, in a sense that there are a lot of video generators that don't have sound and video editing platforms, I think can make really great use of this.
In addition, I think you know a lot of people will say that Google is going to basically beat them because Google can already do this.
They have the sound effects and the video combined and kind of the Gemini Google generators video generators that are out right now.
But I think there is a lot of use case if you can imagine built into something like Adobe Premiere, where maybe you have, you know, footage that was shot.
Maybe there just is no sound.
Maybe you grabbed copyright free footage off online that didn't have any audio to it and you want to add something after the fact, right?
You don't want to go and like kind of regenerate a whole video afterwards.
For the clip that you have, you just want to add sound or change the sound in it.
And so I think that there's a lot of.
Or maybe you know your microphone is off or your microphone is bad on your camera, whatever.
I think there's a lot of cases where you have footage and you want to add.
You want to add audio to it.
And so I think it's probably less of like a creator by creator using their platform for explicitly.
But I think they're right.
The API usage.
So having their software plugged into other software. will be a good solution for this.
They said that they're investing in building out their workspace for creators.
They have something called the Morello Studio which is going to eventually support kind of like a full professional use software studio.
So I think this is interesting.
I also think plugging it into other products is a really good way to go.
So, as they're preparing to scale right now, they're also anticipating concerns around training data that have been difficult for a.
According to Georgia Stevenson, who led Index's investment into this company, they based their model on public and purchase sound libraries, and they're signing revenue sharing partnerships that are giving money back to artists who have rights to some of those sound effects.
So, you know, they'll go and they'll pay for them and then they have some sort of royalty program.
So, you know, I think this is a good way to go.
It's definitely something that's tricky with a lot of these AI generated tools right now.
I think that, you know, people are concerned they're going to displace musicians or sound designers.
They currently have a freemium model that has a like and also a $20 a month plan.
And so they said that they're mostly targeting amateurs and prosumers that are wanting to unmute their AI generated videos.
But I think you could also see a pretty great use case for regular videos getting these sound effects as well.
When their CEO was asked about where they kind of stand in the market.
There's a funny quote where he said George Lucas said that sound is 50 of the movie going experience.
It's not an overstatement.
If anything, it's an understatement.
You can take exactly the same image and the sound will shape a completely different ambience depending on the sound and the music that you put in there.
So he has a co-founder as well who's named Florian Wenzel.
They're both AI researchers and they're also musicians.
So they said that AI music generation is on their roadmap, but I think they are seeing more pull from the sound effects.
They obviously are more integrated there.
I think part of that is because less researching is happening there than in other fields.
And so their company stands out.
They said, quote, it's easier to build a real moat here and then capitalize on it.
So I think this could pay off for Morello.
Their valuation has increased very significantly since they did their pre-seed round.
That was led by Atlantic, which is based in Berlin as well.
They also have some participation in this new round that was just raised.
So total, they've raised $44 million, which is pretty fantastic for the whole company.
They are also backed by some angels who give them a bunch of credibility.
They have the Mistral CEO, which is Arthur Mensch, and also the Hugging Faces, chief science officer Thomas Wolfe.
They also have the fal.ai co-founder, Birke Gur, a bunch of other people.
So the team is obviously trying to work quickly.
We know that these AI generated videos are not going to probably mute forever.
And so I think they want to get their technology as advanced as quickly as possible.
But Google Gemini has their video generator that now incorporates soundtracks, which is powered by DeepMind's VO 31 audio.
To our video, to audio model.
So, if anything, I think that they know time is of the absence and they're trying to really quickly move on this, on this technology.
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