After a Y Combinator rejection, this founder raised $15 million for his AI search startup. Read the pitch deck.

In a groundbreaking development for the online search landscape, the AI-driven SEO agency Daydream has successfully raised $15 million in funding. This innovative startup merges artificial intelligence with human expertise to enhance SEO tasks, which include keyword strategy, content generation, and technical audits. The Series A funding round was led by WndrCo, with additional investments from First Round Capital and Basis Set Ventures. Co-founders CEO Thenuka Karunaratne and CTO Shravan Rajinikanth have now secured a total of $21 million in funding since the company's inception. Karunaratne pointed out that despite the so-called 'hype bubbles' surrounding ideas like generative engine optimization (GEO), the fundamentals of optimization in AI search remain largely consistent with traditional SEO practices. Key components such as relevant content, backlinks, mentions, and crawlability are just as essential in both realms. Interestingly, the AI algorithms tend to prioritize platforms like Reddit and other earned media sources. Karunaratne's journey into the world of SEO began in high school with the creation of affiliate websites. His entrepreneurial path encountered challenges, including a rejection from Y Combinator. However, he was encouraged to reapply, and by the time he chose to pursue Daydream, the startup was already attracting interest and funding. The initial pre-seed fundraising process was longer than he anticipated, taking several months. However, he shifted his perspective, viewing the experience as a valuable learning opportunity rather than a binary win or loss, which ultimately helped him garner customer leads from investors who had initially declined. Daydream caters to a diverse clientele, including marketing and SEO executives from companies ranging from 20 to 1,000 employees, such as AI sales startup Clay, coding platform Replit, AI image creator OpenArt, and creator monetization service Beacons. The new funding will enable Daydream to scale its product and engineering teams while also increasing the number of growth leads—human SEO specialists who support its AI agents. Currently, Daydream employs around 20 individuals. Although venture capitalists have typically viewed agencies with skepticism, the rise of AI is transforming this perception. Karunaratne noted that Y Combinator has identified AI-native agencies as a leading category in its latest Request for Startups. The pitch deck that Daydream utilized to secure its $15 million investment has been redacted for public sharing, giving insight into the startup's innovative approach.