Pocket FM, an audio platform based in India, has successfully raised $103 million in Series D funding. Lightspeed Ventures led the funding round, with Stepstone Group also participating. With the support of influential investors like Tencent and Times Internet, the company has set its sights on expanding into Europe and Latin America. This strategic move follows promising results in the U.S. market.
Eltrys has exclusively learned that the company has raised an impressive $196 million across multiple rounds, resulting in a valuation of $750 million.
Eltrys reported last year that the company was in talks with Lightspeed to lead the funding round announced today. 
Can you please explain how the platform operates?
Pocket FM primarily provides audio series with short episodes. Users can listen to certain series or episodes for free and purchase coins to unlock others. Pocket FM has discovered that the pay-as-you-go model is better suited for their company than adopting a subscription-based approach like Netflix or Spotify.
The lack of recurring payment cycles for users is a drawback in terms of revenue. However, it has the potential to generate profits and encourage customers to make repeat purchases. If users are interested in accessing additional content in a series, they have the option to purchase coins, similar to acquiring level-up items in a game.
The company is also heavily investing in the creator economy. In the previous month, the company announced its intention to invest a substantial $40 million into its writing platform, Pocket Novel, resembling Wattpad. Last week, the company’s co-founder, Rohan Nayak, shared on LinkedIn that an impressive number of over 90,000 writers have joined the platform since February 20. Pocket Novel also encourages users to purchase coins in order to access additional content.
However, currently, there is no integration between the two apps, even though they both have a coin-buying mechanism to unlock content. Note that you cannot use the coins you purchased on Pocket FM to unlock content on Pocket Novel products, and vice versa.
Pocket FM also operates in the audiobook space, competing with popular platforms like Audible by offering a pay-to-unlock model. The company is currently operating this product exclusively in India through established partnerships.
Playing with numbers Pocket FM usually focuses on maximizing user engagement on the platform. With an extensive audio platform, there are over 100,000+ hours of content and a vast library of over 400,000 episodes spanning various genres and languages.
The company’s expansion into the U.S. market has been a significant catalyst for revenue growth. According to reports, Pocket FM has achieved an impressive $150 million in annual recurring revenue this year, with a significant $100 million contribution coming from the United States. The company has a strong presence in various markets, with the United States and India being its largest ones.
The platform has experienced significant engagement from its user base in the United States. On a global scale, users spend an average of 115 minutes on the audio platform. However, in the U.S., that average increases to 135 minutes.
With Omidyar Network’s backing and competition from local players like Pratilipi, the Pocket Novel writing platform boasts an impressive community of over 250,000 writers. The company has set a goal for Pocket Novel to achieve $100 million in ARR by 2025.
Explorations in GenAI and the Creator Economy
It’s no wonder that Pocket FM is eager to experiment with generative AI-based features. It is currently testing a tool for writers in the U.S. to convert their writings into audiobooks, just like a savvy investor seeking new opportunities. The company has partnered with Eleven Labs to offer writers a diverse selection of 50 AI-powered voices.
The startup mentioned that it is also developing AI-powered tools to assist creators in writing their stories more efficiently.
Similar to a venture capitalist, Pocket Novel writers have the opportunity to earn through a revenue-sharing program. Additionally, the startup offers enticing incentives to motivate writers to achieve their writing goals. However, the use of AI tools that frequently produce unreliable or subpar results has resulted in a significant amount of mediocre content on the platform.
Nayak explained to Eltrys that it is primarily the responsibility of a platform to effectively eliminate unnecessary distractions.
It’s important to sift through the clutter and ensure that you only provide top-notch content to your listeners. In our context, AI is primarily focused on harnessing its potential to enhance productivity and efficiency for creators and writers,” he explained.
Pocket FM provides insights into the potential earnings of writers on the platform, highlighting that certain individuals are able to generate over $3,000 per month. However, specific details regarding the average overall income remain undisclosed. The company does not require creators to sign an exclusivity clause upon joining the platform. However, the startup has established certain agreements to secure ownership of the intellectual property.
According to Harsha Kumar, a partner at Lightspeed, Pocket FM will have to consider the preferences of different regions while meeting the global demand for audio content.
Platforms that depend on user-generated content tend to prioritize visibility and earnings for well-known creators. Kumar is confident that a well-developed recommendation algorithm will be crucial in achieving equality.
This is always a challenging equilibrium. Companies have the opportunity to explore various strategies, such as hyper-personalization for consumers and leveraging AI assistants to enhance creators’ earnings. She asserts that the platform’s recommendation algorithms significantly influence the suggestion of either popular content or content customized to your preferences.
Looking ahead to potential investment opportunities and strategies for growth
In addition, the company is already engaging with investors for its upcoming funding round. Last week, Eltrys reported that Abu Dhabi’s sovereign wealth fund, ADIA, has engaged in discussions with Pocket FM regarding a potential large-scale funding round.
The company did not directly address that development, but it mentioned receiving substantial interest from investors.
When you’re scaling, there tends to be a significant amount of investor interest. However, the possibility of a new round of funding hinges on our scaling plan and the successful materialization of certain factors,” Nayak explained.
The primary obstacle lies in tailoring content to resonate with the preferences and cultural nuances of specific regions. Some regions have a preference for stories with greater local appeal. They tend to resonate more when the characters have relatable names and the locations are familiar and recognizable. “Another challenge that arises is the task of constructing and managing a worldwide organization that embraces a consistent culture,” stated Kumar from Lightspeed.
Nayak also noted that the company is not yet turning a profit, but it boasts a strong gross margin and is prioritizing expansion. The startup currently employs approximately 800 individuals and has plans to expand its workforce by 500 people worldwide.
