Tolan Raises $30 Million as Character.AI Sells Itself in Bankruptcy

Tolan, which makes an AI companion app, raised $30 million in a round led by Union Square Ventures, with existing investor Khosla Ventures participating. TechCrunch reported Homebrew also took part and that the round doubles Tolan's total funding. Tolan did not disclose its new valuation; TechCrunch reported its previous valuation was $120 million.

In its announcement on October 19, USV said more than 250,000 people are spending time with their Tolan this month and that users have had more than 70 million conversations with their Tolans over the past year. Tolan told Upstarts Media that annual recurring revenue more than doubled from a year earlier and is in the double-digit millions, that about 70% of users are women and 40% are parents, and that users have paid between $10 and $200 a month. The company is not yet profitable. "I'm very proud that we didn't start by serving a Silicon Valley audience," CEO Quinten Farmer told Upstarts.

The other end of the category

Character.AI, which had 20 million monthly active users by October 2024 according to TechCrunch, filed for Chapter 11 bankruptcy and agreed to sell some assets to Disney for $20 million, plus a non-exclusive, perpetual license to its technology. TechCrunch reported a court document put the company's assets and liabilities between $50 million and $100 million. Disney's bid is a stalking horse, so a higher offer could still emerge. "If such a bid is unavailable, however, the platform will be wound down," CEO Colin Adams said in a statement reported by TechCrunch.

On October 18, TechCrunch reported that Disney agreed to make job offers to at least 60 Character.AI employees, the majority of its workforce, with estimated annual compensation of $60 million. A filing cited by TechCrunch said the company had a "large and engaged user base" but was hobbled by high costs and "potential litigation-related liabilities and regulatory engagement."

What separates the two

Tolan's pitch, per USV, is an ongoing companion that helps with ordinary life: groceries, kids' birthday parties, family logistics. Its users skew toward women and parents in their 30s and 40s who pay a subscription. Character.AI built scale on open-ended chat with characters, with heavy use by younger people, and now faces lawsuits and government child-safety investigations. Investors are still funding companionship, but the money is following paying adults, a clear use case and lower legal exposure.

Why it matters: AI companions compete with dating apps for the same evenings and the same subscription budget, and Tolan's users look a lot like the 30-plus, intent-driven daters many dating brands want. Two lessons carry over. First, paying adult users and a defined job to be done are what investors will fund in emotionally loaded consumer products. Second, safety and litigation risk can sink a company with tens of millions of users, so dating operators adding AI features should budget for age assurance, moderation and legal review from the start, not after growth.

Sources: Union Square Ventures announcement · TechCrunch, October 19, 2026 · Upstarts Media, October 19, 2026 · TechCrunch on Character.AI's Chapter 11 filing · TechCrunch on Disney hiring Character.AI staff