AI video app developer Reka AI has acquired video generation AI model startup Moonvalley in an all-share exchange deal.

The Information reported, citing 2 people familiar with internal matters, that Toronto-based Moonvalley was founded in 2023 and offers video generation models trained on licensed data to avoid copyright infringement. It has raised $154 million from General Catalyst, Khosla Ventures and Y Combinator, among others.

Reka AI, in its third year since founding, develops software that lets businesses search and query video and image content, as well as AI research and audio generation technology.

In 2024, data platform company Snowflake considered acquiring Reka AI for $1 billion, but the deal fell through. Reka AI later shifted from developing frontier models to enterprise image and video applications.

Through the Moonvalley acquisition, Reka AI plans to expand its business into world models and robotics. World models are a type of AI that simulates the physical laws of the real world. Moonvalley co-founders Mateusz Malinowski (마테우시 말리노프스키) and Mikolaj Binkowski (믹 빈코프스키) are former Google DeepMind researchers who took part in developing a model that served as a predecessor to Google's AI video model Veo 2.

The deal is seen as another example showing that AI model development startups are in a difficult situation. The Information said, "AI model development is expensive and it is becoming increasingly difficult to secure the necessary computing resources. Startups targeting niche markets such as video and image generation also face copyright issues, making it difficult for them to survive independently."