Blockchain startup Story raises $80M in funding to prevent AI copyright theft; now valued at over $2 billion

Story Protocol (Story) has secured $80 million in Series B funding to combat copyright theft by AI using blockchain technology. The funding round, which was led by Andreessen Horowitz (a16z), pushed the company’s valuation to over $2 billion.

Other notable investors in this round include Polychain. PIP Labs, the original contributor to Story Protocol, announced on Wednesday that the fresh capital will be used to prevent AI companies like OpenAI from misappropriating creators’ intellectual property.

The valuation of the two-year-old company now stands at $2.25 billion, sources familiar with the matter told CNBC, though the information remains private.

PIP Labs co-founder and CEO SY Lee emphasized that their focus is on solving real challenges affecting the creative industry. Lee stated, “We’re addressing a genuine issue impacting creators, not just adding another technical tweak.”

“AI models don’t evolve without great original IP,” Lee noted, stressing that AI systems are exploiting creators’ data without consent, profiting without sharing the rewards.

Story Protocol operates by converting intellectual property into modular assets, termed “IP Legos,” that can be licensed, managed, and monetized through smart contracts on a blockchain. This system empowers creators to embed licensing and royalty terms directly into their IP, ensuring control over how their work is used.

“Now it’s turned from IP into IP Lego,” Lee told CNBC. “Now, you don’t need to go through lawyers. You don’t need to go through the agents. You don’t need to do this very lengthy business development negotiation. You just embed your licensing, royalty-sharing terms into small contracts.”

Lee explained, “With Story, creators can embed licensing terms directly into their IP, making it clear that anyone using it must follow their rules. It’s about claiming ownership over your data and IP.”

The discussion about what AI companies owe to creators is gaining momentum in the entertainment industry. “In the past, platforms like Google would drive some traffic to your content, but even that undermined many local newspapers,” Lee remarked in a press release. “The current AI landscape removes the incentive to create original IP altogether.”

Founded in 2022, Story Protocol functions as a blockchain network where creators can establish ownership of their content by storing their IP on the platform. The technology works by embedding terms like licensing fees and royalty-sharing arrangements into smart contracts, making IP “programmable” and simplifying the enforcement of usage rights.

Lee pointed out that this approach effectively eliminates the middlemen usually involved in copyright disputes. “Now, IP becomes IP Lego,” Lee told CNBC. “No need for lengthy negotiations or legal battles—just embed your licensing and royalty terms into smart contracts.”

One example of Story in action is Ablo, an AI tool that enables users to create custom fashion items using designs from major brands like Balmain and Dolce & Gabbana. These brands receive compensation through various licensing and revenue-sharing agreements.

Fighting AI Copyright Theft

Addressing AI copyright theft has become a hot topic. Actor Joseph Gordon-Levitt, in a July 2023 op-ed in the Washington Post, argued that creators should be compensated if AI uses their work. This principle is at the core of Story Protocol, which is quickly gaining traction as an investment theme.

AI companies have extensively used online creative content to train their large language models (LLMs), leading to legal battles between creators and tech giants like OpenAI. The New York Times is currently engaged in a legal fight with OpenAI over copyright infringement, while YouTubers have filed similar claims against Nvidia. Meanwhile, News Corp has struck a deal with OpenAI to license its content for LLM training, reportedly worth over $250 million.

AI copyright theft has increased since the launch of ChatGPT two years ago. Earlier this year, we covered a similar story after Microsoft and OpenAI were hit with a lawsuit by authors over AI training data. Two authors, Nicholas Basbanes and Nicholas Gage, filed a lawsuit against Microsoft and OpenAI on Friday in a Manhattan federal court accusing the companies of using their work without permission to train AI models such as ChatGPT.

Meanwhile, Story Protocol aims to address the ongoing issue of copyrighted media being exploited by powerful generative AI models like ChatGPT. These models, which are increasingly used as search alternatives, rely on vast amounts of training data, often sourced from copyrighted material.

Story Protocol makes most of its revenue by charging a network fee for transactions on its platform.