Venice AI raised $65M to exploit OpenAI's blind spot
AI chatbots increasingly receive information that people would hesitate to share with colleagues, healthcare providers, or even search engines. Questions about health, finances, and legal matters are routinely entered into these systems, often with little consideration of where that data is ...
Overview
AI chatbots increasingly receive information that people would hesitate to share with colleagues, healthcare providers, or even search engines.
Questions about health, finances, and legal matters are routinely entered into these systems, often with little consideration of where that data is stored, processed, or used.
Six major United States AI companies collect those conversations and feed them into their training models by default, a Stanford University study found.
One startup is betting that the gap between what users assume and what platforms do with that data is the biggest opening in AI.
Venice AI closed a $65 million Series A at a $1 billion valuation, its first outside funding since launching in 2024.
The company, co-founded in 2024 by crypto entrepreneur Erik Voorhees and Seattle-based tech veteran Jesse Proudman, has surpassed more than 3 million users while declining to store any prompts or responses on its own servers, GeekWire reported.
Venice AI's first outside funding round values the company at $1 billion
Venice provides access to more than 200 AI models, including those built by OpenAI and Anthropic, through a single consumer interface and developer application programming interface.
The core difference from those competitors is architectural: all user inputs are encrypted and decrypted on the user's own device, routed through an external proxy, and never retained on Venice's infrastructure, TechCrunch reported.
The company turned profitable during the first quarter of 2026 and is now generating annualized run-rate revenues above $70 million, CEO Erik Voorhees told TechCrunch.
OpenAI, by comparison,is leaning toward delaying its potential initial public offering into 2027 rather than listing below a $1 trillion valuation, according to The New York Times.
How Venice generates $70 million in revenue without storing your data
Venice makes money through consumer subscriptions and paid developer API access, without harvesting user conversations for training or advertising, according to the company's privacy documentation.
Venice also operates two cryptocurrency tokens, VVV and DIEM, though only about 8% of users pay with crypto, TechCrunch noted.
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The startup has grown from roughly 15 employees a year ago to about 45 today, processing an average of 1.7 million API calls daily.
Venice plans to use the new capital to build its own graphics processing unit (GPU) infrastructure rather than continuing to lease computing capacity, a move designed to improve gross margins over time, TechCrunch reported.
Stanford researchers say the AI privacy gap is not theoretical
The vulnerability Venice targets has academic backing.
Details
Researchers at Stanford's Institute for Human-Centered Artificial Intelligence analyzed six frontier AI companies and found that all six use customer chat data by default to improve their models, with some retaining information indefinitely.
Jennifer King, Privacy and Data Policy Fellow at Stanford's Institute for Human-Centered AI, said hundreds of millions of people are using AI chatbots that collect personal data for training.
We have hundreds of millions of people interacting with AI chatbots, which are collecting personal data for training, and almost no research has been conducted to examine the privacy practices for these emerging tools.
Some companies allow human reviewers to read users' chat transcripts for training, the Stanford team found.
A question about a health condition or a legal dispute can flow into a model's training data, influence future outputs, and become vulnerable to subpoenas or breaches.
AI privacy legislation gains momentum in Congress
Federal lawmakers are starting to address the regulatory void.
Representatives Thomas Massie and Lauren Boebert introduced the Surveillance Accountability Act in April 2026, which would require warrants before federal agencies access third-party digital data, Rep. Lauren Boebert's office confirmed.
Naomi Brockwell, founder of the privacy nonprofit Ludlow Institute, helped draft the bill and warned that AI has fundamentally expanded the scale of government surveillance.
The Federal Bureau of Investigation has separately expanded its use of AI for investigations and facial recognition, according to the Department of Justice's 2025 AI use case inventory.
Venice AI's crypto roots and what the $1 billion valuation signals
Privacy debates are familiar territory for Voorhees, who founded ShapeShift, a cryptocurrency exchange that initially allowed users to trade without identity verification.
Voorhees has long argued against government surveillance of digital transactions.
After a Wall Street Journal investigation into ShapeShift's identity practices, he told the paper, "I don't think people should have their identity recorded to catch an occasional criminal," TechCrunch reported.
Proudman previously founded cloud-computing company Blue Box, which IBM acquired in 2015, and crypto startup Strix Leviathan, acquired by hedge fund Parataxis in early 2025, GeekWire reported.
Proudman framed the privacy risk in concrete terms. "It only takes one breach, one disgruntled employee who is going through that data, a government subpoena, a change in government policy, and then all of that data no longer is private to you," he told GeekWire.
TechCrunch noted the overlap between Voorhees's crypto background and Venice's new backers, with Dragonfly, Coinbase Ventures, and Morgan Creek all managing significant cryptocurrency portfolios.
Whether Venice can convert that base into a mainstream consumer brand will determine if the $1 billion valuation holds as the AI privacy market evolves.
Related: OpenAI’s $1 trillion ambition could delay its IPO
Source
Originally published at www.thestreet.com.
