Midjourney Is Profitable and Chasing Hardware Dreams. But Can It Survive Google?

When I asked him about this moment, Holz talked about how much he values the opportunity to speak with Midjourney users and field weekly questions from them, a much more direct relationship with his customers and fans than most CEOs embrace. “Our goal is to be open and transparent,” he wrote in an email. “It’s difficult (or even impossible) to predict when a new major AI model will be ready.”

Product delays aren’t Holz’s only concern. Lately, competition for AI images has greatly intensified, with pressure coming from some of tech’s biggest companies, like Google, OpenAI and ByteDance. And Midjourney’s popularity appears to be diminishing: In the past six months, the site’s traffic has declined 26%, according to Similarweb, a web analytics firm. (Midjourney doesn’t have a stand-alone app. Most users access its AI through a browser.) The peak traffic came in April 2023—just a month after the startup ended free access to its AI. Since that high point, the website’s monthly visits have fallen 60%.

Holz hasn’t taken a drop of venture capital, and when Midjourney first launched in 2022, investors were salivating at the thought of convincing him to do so. Not so much anymore: As one VC said: “I haven’t heard about Midjourney for a while.” Another investor, Deedy Das, was more direct about the startup’s situation. “I don’t necessarily think it’s unfeasible for multiple models to coexist and be good businesses,” said Das, who has invested in Higgsfield, a Midjourney competitor. But “the pie only grows so much.”

During Midjourney’s debut, its AI earned a fan base that liked how its images seemed artsier and more stylish than ones made with programs like OpenAI’s Dall-E. And even in an industry full of singular leaders, Holz was a distinctive Silicon Valley personality, eschewing industry norms and known for parties that attracted the likes of Elon Musk.

Yet Midjourney risks becoming a cautionary tale in a distinctly new chapter of the AI age, part of a storyline unfolding across tech. Over the last year, some of the AI industry’s biggest players have begun gradually creeping onto the turf of smaller companies. For example, Anthropic and OpenAI have released AI coding tools that have put pressure on startups like Cursor.

In the case of Midjourney, Nano Banana, the image-generating AI tool Google released last year, has become particularly problematic, due in part to its wide distribution through that company’s Gemini chatbot. The seemingly boundless possibilities for nascent startups like Midjourney have given way to more sobering questions about whether they can outrun the established giants.

According to Holz, Midjourney’s revenue “significantly surpassed” $200 million in 2023. Since then, he will only say that revenue has “gone up,” declining to comment on any specifics. The company is profitable, he said.

To make that revenue, Midjourney sells a monthly subscription to its AI that ranges from $10 to $120, based on usage. (Holz wouldn’t comment on how many subscribers Midjourney has.) Another revenue source is a licensing deal it struck last year with Meta Platforms, which lets Meta incorporate Midjourney’s AI in its own models and products. Holz wouldn’t comment on the Meta deal’s specifics. Meta reportedly paid a Midjourney rival, Black Forest Labs, $140 million for a multiyear licensing agreement.

In addition to growing competition for its flagship product, Holz faces the same looming threat of intellectual property litigation that confronts many AI companies. Last year, Disney, Universal and Warner Bros. Entertainment all filed lawsuits against Midjourney, accusing it of training its models on their copyrighted works. The company contends that its AI constitutes fair use, a legal principle that allows someone to build off another person’s project as long as the final creation is distinctly different from the original. The cases against Midjourney are still ongoing.

Then there are Holz’s hardware dreams. For the past two years, he has teased a mysterious hardware effort, and Midjourney’s website lists seven forthcoming hardware and software projects under alluring but vague themes, including “reflection,” “beauty” and “human flourishing.” According to the site, they’ll be launched “over the coming months.”

One person who worked with Holz recalled him brainstorming a number of “random” project ideas for the hardware team in fields ranging from quantum computing to wellness. One such idea included a robotic arm that could scan and collect data to help generate 3D models, this person said. Holz was also interested in brain-computer interfaces, like Musk’s Neuralink, which allow users to control devices directly using their brain, said the person.

Holz acknowledged that a real push into hardware may force him to reconsider how he has set up Midjourney. “We have never raised and don’t need any money for the business right now,” he said. “But we have projects that may benefit from external financing over the next few years.

“Our mission is mainly focused on creation and creativity,” he continued. “But we have a few projects, which are not related to these things, that just seem very important for humanity.”

Holz has a tendency to talk in grand terms—even as he asks users to keep waiting to see Midjourney’s full potential. “I think that though we may seem like the Apple of AI right now, within a relatively short period after announcing our other projects, it will be clear that we are something very different,” he said in a Discord question-and-answer session earlier this month. “I am looking forward to that deeply.”

---

This isn’t the first time Holz’s big dreams have had to face reality. It happened with his first startup, too.

Back in 2010, he and a middle-school buddy, Michael Buckwald, co-founded Leap Motion, hoping to sell a device for controlling computers with hand gestures that Holz had first started to think about as a high schooler. By 2013, Leap Motion had raised about $50 million and had a nearly $300 million valuation, attracting investors like Founders Fund and Andreessen Horowitz. Apple reportedly approached Leap twice about possibly buying it. (At one point, Mira Murati, the Thinking Machines Lab co-founder and former OpenAI executive, was Leap Motion’s vice president of product and engineering.)

But Leap Motion’s product didn’t take off as Holz and Buckwald had hoped, and even though they were early to the market, they soon faced stiff competition from a slew of other companies working on similar devices and the hesitancy of consumers to give up their traditional computer mice. In 2019, Leap Motion sold itself to rival Ultrahaptics for $30 million.

Afterward, Holz turned to advisors like Philip Rosedale, creator of Second Life, an early metaverse project. Holz had hoped Leap Motion’s device might be used in virtual reality settings, and his interest remained firmly rooted in how technology could be used to create new futuristic and fanciful worlds.

“David has always been interested in creating kind of the ‘waking dream’ in some way,” said Rosedale, who recalled Holz “meditating about some really crazy hardware ideas,” as well as a project that would involve making online avatars “more believable” and “more lifelike in their behaviors.” In Holz’s words, his idea was to develop affordable VR technology that would track the movements of a person’s entire body and move their digital avatar around in a metaverse. Ultimately, he scrapped the idea because it “didn’t feel ambitious enough.”

By early 2021, Holz had seen early papers and open-source work related to AI image generation. Then relatively niche, it would later be popularized by models like Stable Diffusion, and he “immediately saw the ramifications of the technology,” he said. He went quiet for several months, Rosedale said, and emerged with the early version of what became Midjourney.

The company publicly launched in February 2022, offering both subscription and free versions. Its AI quickly became a hit with creatives, who praised the artistry of Midjourney’s early models. OpenAI had released Dall-E more than a year previously, but Midjourney produced images that looked less realistic and more like beautiful illustrations. It won over people like Kai Turner, an independent AI video creative director who previously worked at Netflix.

“I was generating like crazy in the beginning,” Turner said. “Because it just seemed, you know, almost magical.”

Midjourney’s unique aesthetics allow it to maintain a dedicated following in the AI art community today. But many users have become frustrated by how difficult it can be to perform simple tasks, like editing, on Midjourney. Of the 14 artists, designers and other creatives I spoke with, half said they are using it less than they once did, citing rapid advances from competitors—especially Google’s Nano Banana.

“You probably hear this from everybody you’ve interviewed, but once Nano Banana hit the market, that’s been a game changer,” said Eli Mavros, executive creative director of R/GA, a New York–based advertising agency that works with clients like Android and Moncler.

Mavros also cited ongoing copyright lawsuits against Midjourney as a reason why he was “nervous” about using it for commercial work. “We never use it on stuff that goes out into the world,” he said. But Midjourney is hardly the only AI company in a copyright battle. For instance, Google faces the same problem. But Mavros said he feels comfortable using Google’s AI, since the company remains “one of the most trusted brands in the world.”

Several former Midjourney fanatics said their usage has dropped so low recently they’ve either canceled or are considering canceling their subscriptions. “Over the past few months, I’ve debated whether or not I need to keep this subscription going,” said Turner, who noted the main thing stopping him is the “warm fuzzies” he feels toward Midjourney, since it provided his introduction to AI image generation.

Holz has so far resisted making Midjourney part of bundled packages of AI tools sold by startups like Freepik, Weavy and Flora. These platforms have become popular among creatives who don’t want to buy multiple subscriptions: Freepik alone had almost 100 million visitors to its website last month, per Similarweb data. However, Holz has said, “we don’t feel offering APIs to these businesses would meaningfully affect our revenue.”

Holz, meanwhile, appears to have become increasingly occupied by a range of other projects. One such effort is a hardware push. Midjourney launched a hardware team in 2024, hiring former Apple Vision Pro Engineering Manager Ahmad Abbas to head the effort. At least a handful of employees are now working on the initiative, according to LinkedIn profiles. The company also recently posted three new openings on its hardware team.

Midjourney operates at times like Holz’s “personal playground,” said one of the people who worked with him. To that person, the hardware push felt like “an echo of Leap Motion—and not necessarily a fit for Midjourney.”

Holz acknowledges that he has imbued Midjourney with an expansive mission. “We are working on several hardware and nonhardware projects, and all are quite exotic,” he said. “The majority of our new business efforts align with our core product. A minority do not but are high potential. This feels like a rational investment strategy.”

Even some users have picked up on the friction between Midjourney’s present identity and future ambitions. Andy Orsow, a video marketer at Framer and an active member of the Midjourney community, described listening to Holz’s Discord livestreams over the past year as “confusing.”

Orsow still considers Midjourney a “cool product” but wonders whether Holz is prioritizing it. “If you listen to David talk enough, it seems like a sort of footnote to what he ultimately wants to be doing,” he said.

---

While Holz’s science fiction–esque projects and online philosophizing have an unclear role in Midjourney’s future, they have made him a popular figure within Silicon Valley. He’s well known for his parties, which draw in a wide variety of guests.

Last month, Holz hosted a party at his San Francisco mansion for Nick Land, a British philosopher sometimes described as a father of AI accelerationism. Land has attracted controversy for his theories advocating for the collapse of democracy and its replacement with an AI-governed autocracy. Roughly 100 people attended, including Grimes, the singer who has three children with Elon Musk. No alcohol was served—Holz is a teetotaler. But there was entertainment: an impromptu panel between Land and far-right provocateur Curtis Yarvin.

The party was co-organized by Massey Branscomb, a micro-influencer among right-leaning techies on Twitter and chief operating officer at AlphaFund, which Branscomb describes as an AI hedge fund. He and Holz aren’t especially close, but he appreciates Holz’s varied interests.

“He’s obviously such a creative person that really unified so many different fields—that is working on so many things at once—that I think people gravitate toward him,” said Branscomb.

At another of Holz’s recent house parties, Musk stopped by, according to a person who attended the event. When Musk showed up, everyone just wanted to ask him about Mars, and it became an informal Q&A, this person said. Musk and Holz first met 12 years ago: Musk was a fan of Leap Motion, Holz said. (Another person who knows Holz said he and Musk have bonded over playing Diablo 4, a popular video game that involves a bloody descent into hell.)

Holz often leads his 70-person startup from his home, rarely turning on his camera for meetings with staff or even during job interviews, according to two people who have worked with him. (Holz said he typically takes meetings while on a walk, “which is hard to do with cameras.”) Midjourney has an office in SoMa, where some employees work in person; Holz said he goes in twice a week and otherwise splits his time between San Francisco and the North Bay.

At one point, Holz rented a mansion down the street from his home for Midjourney employees to visit, but it largely went unused, one of the people who worked with him said. Holz said Midjourney no longer rents this house, which was meant for offsites and co-working. “It was a bad idea,” he admitted.

Last week, Holz marshaled his team to finally offer a beta release of Midjourney’s long-awaited version 8 update. It received mixed reactions from users. Some people praised its improvements in speed and prompt accuracy. “The magic is still there—stronger than ever,” gushed Maïm Garnier, an independent AI filmmaker based in France.

But others pointed to persistent flaws like distorted faces and extra fingers, issues they felt Midjourney should have already solved. After some users posted their criticisms on X, Holz pushed back in a livestream on Discord, calling the reaction “negative” and suggesting critics were “paid creators” deliberately highlighting bad results. “I almost want to ban those people,” he said.

For Alex Patrascu, co-founder of Massive Studios, a creative studio based in Los Angeles that embraces AI, Holz’s response was a breaking point: After hearing those remarks, he canceled his subscription. “Like, dude, I’m a paying customer. I’m paying you $120 a month, and you want to ban me because I’m criticizing the product you launched?

“My read is that they can’t compete with the big boys anymore,” Patrascu added.