Inside a tiny San Francisco startup's unlikely pitch: that the future of artificial intelligence looks a lot like the early internet—and desperately needs a better way to make money.
Koah closed a $20.5 million Series A round on February 24, money that CEO Nic Baird says will help solve what's become an existential question for AI chat applications: How do you keep the lights on when subscriptions don't scale and users balk at paywalls?
His answer? Ads. Native ones. Embedded directly into conversational AI responses.
It's a premise that might make some users recoil. But Theory Ventures, which led the round alongside returning backers Forerunner Ventures and South Park Commons, is betting Baird is onto something. The financing pushes Koah past $26 million in total funding since the company emerged from stealth in 2024—a notable vote of confidence in a monetization model that remains, to put it mildly, unsettled.
A Google Veteran Spots Familiar Territory
Tomasz Tunguz doesn't just write checks. The Theory Ventures founder and general partner—who spent years as a product manager on Google's AdSense before moving into venture capital—joined Koah's board as part of the deal. It's hard to ignore the symmetry. AdSense turned the chaotic early web into a functional marketplace for advertisers and publishers alike. Tunguz seems convinced AI chat represents the next version of that problem.
"AI apps are a new interface layer," Tunguz said when the round was announced, a statement that doubles as thesis and prediction. His firm's bet: the conversational interface needs its own infrastructure. Something purpose-built. Not retrofitted from banner ads or search results.
Whether the analogy holds depends on questions no one can quite answer yet. Will users tolerate ads woven into ChatGPT-style interactions? Can contextual targeting work when the context is a meandering conversation about mortgage rates or vacation destinations? And—perhaps the trickiest part—who decides when a recommendation crosses the line from helpful to manipulative?
Building the Plumbing
Koah operates what it calls a two-sided marketplace, though that undersells the complexity a bit. On one side: AI chat apps and agents looking to monetize. On the other: advertisers hunting for attention in this strange new channel.
The company offers lightweight software development kits for Web, React, Flutter, iOS, and Android—tools that Koah claims can be integrated "in minutes," a timeline that likely varies depending on how much coffee the developer has had. Publishers embed Koah's tech to serve what the startup describes as "LLM-native ad formats": sponsored sources, suggested follow-up questions, prefix and suffix placements. All text-only for now, though that will presumably change.
Advertisers, meanwhile, get access to CPC and CPM pricing models. Koah promises "privacy-safe targeting" based on first-party data and conversational context—phrasing that does a lot of work in a regulatory environment increasingly hostile to tracking. According to Adweek's reporting on the round, Koah takes a 30% cut of the revenue that flows through its platform, a figure that puts it somewhere between Apple's App Store and Google's ad network in terms of commission rates.
The pitch, essentially: We'll handle the messy parts so you don't have to build an ad stack from scratch.
Early Returns, Modest Scale
Koah says it has processed 175 million queries and served 35 million ad impressions so far, numbers that sound impressive until you remember Google processes billions of searches per day. The company's network currently reaches more than 2 million monthly active users—a respectable start, though hardly dominant. Average click-through rates hover around 2%, per Koah's own marketing materials. For context, that's roughly in line with display ads on the open web, though direct comparisons get murky fast.
Live partners include Liner, an AI-powered search tool; Viro, which markets itself as an eco-conscious ChatGPT alternative; DeepAI; Luzia; and Heal.ai, a parenting app. (If you haven't heard of most of these, you're not alone.) Koah has published case studies showing what it calls "performance lifts"—Liner, for instance, reported 454% growth in daily active users alongside a 122% jump in click-through rates after adopting Koah's ad formats. Whether those gains stem from the ads themselves or other product changes remains somewhat ambiguous.
Named advertisers have included Upwork, Skillshare, and General Medicine, though the company declined to share current counts.
The Competition—and the Complications
Koah isn't operating in a vacuum. OpenAI began testing ads inside ChatGPT earlier this month, a move that sent ripples through the AI world. Anthropic, by contrast, has publicly sworn off advertising in Claude, though corporate promises have a funny way of evolving when revenue targets loom. Perplexity dabbled with ads starting in 2024 but appears to be pivoting toward subscriptions and enterprise deals—a strategic retreat that suggests the model isn't as straightforward as it looks.
Meanwhile, a clutch of startups are chasing the same opportunity. Kontext bills itself as the "largest ad platform for AI chatbots." Thrad.ai claims to be the "world's first SSP for LLMs"—supply-side platform, for those not fluent in ad-tech jargon. Nexad raised $6 million in seed funding last April for a similar product. The space is getting crowded, fast.
And then there's Washington. Senator Ed Markey raised concerns about privacy and consumer protection in AI chat ads back in January, a warning shot that suggests regulatory scrutiny won't be far behind if this category takes off.
What Comes Next
Koah plans to funnel the fresh capital into engineering hires, go-to-market expansion, new ad formats, analytics tools, and SDK development—a fairly standard checklist for a Series A company. Baird has argued that subscriptions alone won't work for most AI apps, a claim that's hard to dispute given how few consumers actually pay for software these days. The question is whether ads fill that gap or just annoy users into abandoning the app entirely.
The company's headcount has swelled to nearly 20 employees, up from the 2-10 range listed on LinkedIn during earlier phases. Baird, along with cofounders Mike Choi and Herrick Fang, met through the South Park Commons Founder Fellowship. All three have stints at recognizable names on their resumes—Affirm, Supermove, Qualified—though none came from the ad-tech world directly, which makes this pivot feel a touch opportunistic. Maybe that's an advantage.
Koah raised a $5 million seed round led by Forerunner last September, with participation from South Park Commons and Andrew Karam, a cofounder of AppLovin. That earlier round bought the team time to prove the concept. This one will determine whether the concept scales.
Or whether, like so many analogies to the early internet, it just sounds better in a pitch deck.
