While AI apps struggle to monetize beyond Silicon Valley's prosumer base, Koah just raised $5 million seed funding to solve what one investor calls "the elephant in the room" — how developers actually make money from AI products. The startup is betting that contextual advertising will unlock profitability for the thousands of AI apps built on top of major models, particularly those serving global markets where $20 monthly subscriptions aren't viable.
Koah just cracked open the AI industry's biggest unsolved puzzle: how to actually make money from artificial intelligence without charging users $20 a month. The San Francisco-based startup announced its $5 million seed round today, led by Forerunner with participation from South Park Commons and AppLovin co-founder Andrew Karam.
The timing couldn't be more critical. While OpenAI and other AI giants rake in subscription revenue from Silicon Valley's prosumer crowd, thousands of developers building on top of these models face a brutal math problem. "Once these things get outside San Francisco, there's only one way to make them profitable on a global scale," CEO Nic Baird told TechCrunch. "It's happened time and time again."
The economics are stark. An AI app serving millions of users in Latin America faces the same inference costs as any Silicon Valley startup, but those users "are not paying 20 dollars a month," Baird explained. This leaves developers caught between expensive AI model costs and users who won't convert to premium subscriptions — a gap that's suffocating innovation in emerging markets.
Koah's solution inserts contextual ads directly into AI chat conversations, marked as sponsored content that appears at relevant moments. Ask for startup business advice, and you might see an UpWork ad connecting you with freelancers. The company is already live across AI assistant Luzia, parenting app Heal, student research tool Liner, and creative platform DeepAI, with advertisers including UpWork, General Medicine, and Skillshare.
The early results suggest Baird might be onto something transformative. Koah delivers click-through rates of 7.5% — roughly 4 to 5 times more effective than traditional adtech companies like Admob and AppLovin when applied to AI contexts. Early partners are earning $10,000 in their first 30 days on the platform, while maintaining user engagement levels that actually improve over time as the ads become more contextually relevant.
