Personal AI App Instinct Faces Compute Crunch That Could Lead to New Funding

The year-old startup behind Instinct, a personal AI assistant that’s caught fire with Silicon Valley insiders, is seeking more computing power, leveraging its early buzz as it faces new competition from giant Meta Platforms.

Over the last few weeks, Instinct, which launched to a select group of users earlier this year, has sometimes notified users that it is running at full capacity and “responses may be slower” as people use it for tasks such as negotiating bills and answering emails. More cash could help: the company is looking to raise $1 billion in new funding after recently raising $250 million, its founder and CEO Noah Shinn has recently told prospective investors, according to a person familiar with the statement.

Instinct, whose app isn’t broadly available, gained attention because it represented a potential breakthrough in AI for consumers after ChatGPT growth slowed dramatically over the past year. While consumers have gravitated to AI chatbots like ChatGPT and Google’s Gemini to retrieve information and get advice or help with a variety of projects, such chatbots haven’t had as much success in handling more complex, personal tasks such as booking services online.

Shinn, who started the company after working as a researcher at customer service AI startup Sierra for two years, has privately said he doesn’t want to charge users a fee. That suggests the company could try to make money through other means, such as advertising.

The company behind Instinct, Spear Street Technology, has recently received some new offers of investment, according to a person who has spoken to Shinn, but talks are still early and the funding round may not transpire.

Computing costs have been a challenge for other fast-growing AI startups, given the relative shortage of specialized servers. AI coding agent Cognition, for instance, has told prospective investors that it must pay some cloud costs up front, gaining capacity that it may not need right away and which is amortized over time, making the costs similar to a capital expenditure like building a data center.

If Instinct’s startup raises the entire $1 billion Shinn has discussed as a goal, current investors expect the price would have to be around $10 billion or higher to avoid diluting existing shareholders more than 10%. This tactic helps protect the value of the equity held by founders and early employees as the company issues more shares.

A valuation of around $10 billion would be a sharp jump from its pre-investment valuation of $2.25 billion following the financing last month, according to PitchBook.

The valuation expectations reflect both how much buzz the AI assistant has generated in its first few weeks as well as a broader venture market in which some in-demand startups are holding back-to-back funding rounds.

Instinct gained notoriety in recent weeks as tech entrepreneurs and venture capitalists raved online about the assistant’s ability to complete a range of tasks of varying complexity, including, managing calendars and ordering supplies for a wedding. Users communicate with Instinct through iMessage and WhatsApp, and can give it access to credit card information and passwords to allow the AI bot to shop or book travel.

However, Instinct cannot send texts on users’ behalf, a key shortcoming of today’s personal AI assistants. Both OpenAI and Instinct have worked on getting users’ permission to access their iMessage accounts on Mac laptops, but such an integration isn’t possible on iPhones.

Prospective investors would be taking a gamble that Instinct’s swift fandom doesn’t get cut short by rivals like Meta. On Tuesday, Meta launched Muse, a similar free AI assistant for consumers.

The fight is still early, said Foundation Capital partner Jaya Gupta on TITV, and she estimated Instinct now counts “a few hundred thousand power users.” (Foundation Capital is not an investor in Instinct.)

Still, she said,“I think the international market is up for grabs” and “Meta will probably win that,” given its ownership of WhatsApp, the message app popular outside the U.S. But if agents take 1% of the market for administrative tasks like negotiating bills and booking travel, “that’s a massive market,” she said.

Instinct has used its past funding, which has totalled $350 million, to rent AI servers, according to one of the people who spoke to Shinn. For now, the company is largely using open-source models to power its service, rather than costlier closed-source models from the likes of Anthropic, said two people who spoke with the company.

Shinn has told prospective investors that he’s interested in moving beyond renting AI chips to eventually owning the chips or even operating his own data centers to save costs in the long run, according to one of the people. Owning chips and operating data centers would require a lot more cash, however.