June 13, 2024
Arc is building an AI agent that browses on your behalf

The Browser Company, which makes the Arc browser, has raised $50 million in a round led by Pace Capital at a $550 million valuation, TechCrunch has learned exclusively.

The company’s head of storytelling, Nashilu Mouen, confirmed the investment to TechCrunch.

“Now, more than ever, we continue to believe that the successor to the personal computer (PC) is imminent. And it starts in the browser. We’ll see you there,” Mouen said in a statement.

The company, founded in 2019, has raised a total of $128 million across multiple rounds with well-known investors such as LinkedIn’s Jeff Weiner, Medium’s Ev Williams, Figma’s Dylan Field, Notion’s Akshay Kothari and GitHub’s Jason Warner. Next Play Ventures and Pace Capital are among the existing investors.

The Browser Company was started by Josh Miller, who was the director of product at the White House during Barack Obama’s tenure and investor at Thrive Capital; and Hursh Agrawal, who had started the conversational service Branch.com with Miller — a startup acquired by Facebook in 2014.

Building Arc

The startup’s Arc browser has managed to capture people’s attention with its feature set like command bar navigation, pinned tabs and different workspaces to separate websites for work and personal consumption. But for the longest time, the browser was available only on an invite-only basis on Mac. Last July, the company opened downloads for all users. Plus, it started making a Windows client available through a closed beta program.

With its desktop client, users often complained about a steep learning curve because the browser has treated tabs differently — they look more like applications. The company’s first iPhone app was just a companion app to save tabs that you could later access on the desktop client. However, in January, the company released the Arc Search app on iOS, focusing on putting AI-powered search at its center. The app didn’t require users to create an account and allowed them to set it as a default browser, possibly to attract a larger user base.

A bet on AI and criticism around it

In October 2023, Arc released the first set of AI features, including a way to rename downloaded files and pinned tabs, easier access to ChatGPT and a preview summary when you hover on a link. With the release of Arc Search, the company introduced the “Browse for me” feature, which read six web pages related to the query and generated a new page with a visual summary.

In February, the startup released more features, including “instant links” to directly go to a result rather than a Google page. For instance, if you search for “Barbie trailer” through this feature, the browser will directly lead you to a YouTube page. It also works on folders where the browser can create a folder with article links when you search for “Folder of Apple Vision Pro reviews.”

The company also released a pinch-to-summarize feature for Arc Search the same month. However, the summary wasn’t accurate in a lot of instances.

Additionally, several journalists criticized the feature raising concerns about the effect on web traffic for publishers. Platformer’s Casey Newton talked about how Arc’s approach might be harmful to journalism and the web overall. The Garbage Day newsletter publisher Ryan Broderick wrote a Fast Company column noting that companies building AI-powered search are not thinking about how their approach might impact websites and people’s motivation to contribute to the web through content.

“The best thing about the internet is that somebody super passionate about something makes a website about the thing that they love. This new feature from Arc intermediates and diminishes that,” Glitch CEO Anil Dash told Engadget last month.

The company is working on an AI agent that would browse the web for you. In a video released in February, Miller criticized Google’s model for driving more ads rather than getting the results that people want. With the AI-agent approach, the company wants to change that. However, critics like Dash have pointed out that this approach could diminish people’s relationships with websites and the people who maintain them.

What’s next for the company?

Despite raising millions of dollars the company has yet to reveal its plans about monetization. This week, The Browser Company launched a website called “We might not make it” to release videos to talk about points like its plans to generate revenue, competition in the space and criticisms of its product approach.

Chris Paik, the lead investor for the latest round of investment in the company, wrote an essay saying that the browser will become an operating system and all software will be accessible through web applications. 

When a technological seam opens up–you get an expanding frontier. When the area to innovate is increasing, the only thing that matters is your rate of innovation. Any fixed amount of innovation will quickly be commoditized. This is ingrained in the DNA of The Browser Company. They ship every week, constantly pushing the boundaries of product innovation,” Paik wrote.

Paul Frazee, who built a decentralized browser called Beaker, said that scaling a browser product is hard as people are set in their way and making them switch is tough. He also noted that without search deals, monetization is difficult.

“The only model that’s had any success is to pair the browser with the search product and to place ads in the search. Browsers don’t really make sense without a search engine, so this is relatively intuitive, but it makes it pretty hard for a browser vendor to monetize without also competing with Google,” Frazee said.

LocalGlobe and YC-backed Sigma OS browser has tried a payment model by making a product for teams, but it’s not a proven model for success.

The Browser Company has a big ambition to build an “internet computer” for users. At the same time, it is facing roadblocks like giving enough incentive for users to change their default web browser while figuring out a monetization strategy to make the company sustainable over the long run.

You can reach out to this reporter at im@ivanmehta.com by email and through this link on Signal.

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