Campfire raises $3.95M for generative AI game tool Sprites

Campfire has raised $3.95 million in seed funding for its AI-based generative game engine called Sprites.

Sprites enables developers to create AI agents with memory and emotion that can converse with users and accompany them on online adventures, making games, interactive media, and consumer applications more personalized and engaging.

The San Francisco-based company has built the technology into its own game, Cozy Friends, which debuts today as a showcase for AI-native games. Like many other generative AI gaming startups, Campfire sees AI technology as the biggest advancement in gaming since 3D.

Siamak Freydoonnejad, co-founder of Campfire, said the company is delivering an all-in-one GenAI platform that enables the world’s first life simulation games with native AI support. Cozy Friends will be available on both Steam for PC and iOS for mobile devices.

The seed round was funded by Y Combinator, FundersClub, Mercury founder Immad Akhund, gaming entrepreneur and investor Juha Paananen, Uken Games founder Chris Ye, and others.

Cozy Friends, available for pre-order today, has a waiting list of more than 20,000 people.

Freydoonnejad described Cozy Friends as the world’s first AI life simulation game, in the vein of Animal Crossing and The Sims, which have become multi-billion dollar franchises. Cozy Friends allows users to interact and befriend AI agents with unique personalities, memories and emotions in a highly personalized and immersive game world, he said.

“The move to AI-native gaming represents the biggest leap forward in gaming since the move to 3D,” said Juha Paananen, an investor at Campfire, in a statement. “When I first saw the demo, I was blown away. We believe this technology will transform gaming and entertainment, and Campfire is showing the roadmap for AI-native gaming with Cozy Friends and the toolset for every developer to do the same with Sprites.”

Sprites by Campfire allows developers to create AI characters that can converse with users and accompany them on online adventures, making games, interactive media, and consumer applications more engaging.

The company was founded in 2021 by Freydoonnejad and Sina Zargaran, longtime friends who met in college. They started out building a multiplayer gaming platform for remote teams. But after building a companion AI agent during an internal hackathon in August 2023 and seeing a five-fold increase in user engagement in their own games, they changed the company’s direction to focus solely on bringing this transformative AI capability to gaming and the broader entertainment industry.

“GenAI is driving a paradigm shift in how people interact with content in video games and entertainment apps,” Freydoonnejad said. “Users can interact with AI agent companions who can speak and take actions, launching emergent adventures across games and apps while maintaining the context of the relationship. This makes the experience more social, more human, and much more satisfying. People can go from playing their favorite game or scrolling through their favorite app with these companions to sharing their everyday experiences. It’s really important to create emotionally intelligent and ethical companions, and that’s our mission at Campfire.”

Remio VR is one of the first developers to implement Campfire’s Sprites platform.

“We knew we wanted to give our users the ability to create their own AI characters, but it wasn’t easy,” Jos van der Westhuizen, CEO of the Khosla Ventures-backed VR social media company, said in a statement. “LLMs alone won’t get you there—they require a lot of custom work. With Campfire’s Sprites, we were able to ship our virtual pet companions in a matter of days, much to the delight of our users. This new capability will give our game a huge competitive advantage.”

The next generation

“We’re building tools for developers who will power the next generation of interactive media, entertainment and consumer applications, and we’re using cutting-edge AI to make that happen,” Freydoonnejad said. “Our toolset is called Sprites. It lets developers create human-like conversational agents with emotions, memories and personalization.”

He added that software developers who use sprites can create entirely new categories of AI-based content.

“One of the types of content that our tools enable is essentially native AI life simulation games. Think Animal Crossing or Sims, but with AI agents that essentially have unique personalities.”

These characters are characterized by dynamic and personalized experiences, unique speaking style, memories and emotions.

“Most importantly, it really unlocks a level of immersion for players to develop meaningful, open social relationships with these agents,” he said. “And those agents can reciprocate that with other agents or other players in these simulated worlds to show what’s possible in interactive media with our tools.”

The company transitioned to generative AI about a year ago. Freydoonnejad said the company was inspired by other companies like Pixar in movies and Epic Games in games.

“These are generational, creative technology companies that are solving every problem needed to deliver paradigm-shifting technological breakthroughs and enable entirely new categories of content,” Freydoonnejad said.

Freydoonnejad and Zargaran are on their second startup. This time, they started by building a multiplayer gaming platform. Then, during an internal hackathon, they adapted to a generative AI gaming platform.

“We saw a huge change in user behavior,” Freydoonnejad said. “Our original intended use case was to populate the lobby with fake players. But people realized those players were AI agents, and yet they spent five times as much time just talking to those agents.”

This helped redefine the company’s mission. The team posted a prototype video on YouTube in November, and it gained a lot of attention from fans.

I noticed that there is a huge amount of competition, including well-funded AI NPC startups like Inworld AI, with a new competitor entering the market every week.

“We evaluated every tool available, from Inworld to Convai and beyond,” Freydoonnejad said. “And we really felt there was nothing that was practical for creating significantly different content from any other developer we talked to.”

He noted that other companies are building layers of abstraction or basic models without actually having meaningful content. It’s like building for a nonexistent market, he said. Freydoonnejad said he sees Sprites as an all-in-one platform for generative AI for interactive media, entertainment and consumer applications.

“Applying LLM to conversational agents is our starting point. We have a lot of other technologies that enhance Cozy Friends that we haven’t commercialized yet, because part of Sprites is about agent behavior and generative media models and diffusion. So we have a lot of workflows around image and video models internally, both from content production and marketing. So we’ll commercialize those workflows and solutions one by one.”

The inspiration came from a “cold start” problem they had with multiplayer. They wanted players to bond in the game’s social chat, so they started creating AI characters with personalities. Players would hang out and talk to players longer than they would play the games, even though they knew they were talking to AI agents.

“It was a pretty humbling experience to create something commercially viable that meets player expectations,” Freydoonnejad said. “Based on all the feedback from our early adopters and the Discord community, that was our journey into the game.”

The company is hiring senior engineers and a technical game designer to expand its five-person team. Freydoonnejad said the company plans to monetize Cozy Friends as best it can as it provides a blueprint for native AI games and the business model that goes with it.

“We want to show how the price of having user-facing AI and LLMs running inference in the background will play out in games,” Freydoonnejad said. The title will likely launch as a free-to-play game with some usage restrictions on the AI. There will likely be a season pass with an unlimited, advanced AI subscription.