How a Spanish startup pivoted to video AI and built a $230 million ARR business with no VC funding

By Alexei Oreskovic, Fortune

Greetings, Tech Editor Alexei Oreskovic guest-writing your Term Sheet today. Silicon Valley likes to think of itself as the center of the tech universe, and San Francisco’s heavy concentration of AI companies is only reinforcing that habit.

But innovation, creativity, and entrepreneurial acumen aren’t restricted by borders, as I was reminded when talking to Joaquín Cuenca Abela recently. The 49-year-old Spanish founder is showing how it’s possible to thrive in the AI market even if your company isn’t building a frontier model, even if it’s not backed by VC money—and even if it isn’t based in Silicon Valley.

Back in 2010, a few years after selling his startup to Google, Cuenca cofounded a company called Freepik in Málaga—the sun-drenched birthplace of Pablo Picasso on Spain’s southeastern coast. Freepik carved a profitable niche for itself as one of the most popular online platforms for stock images, and the company helped establish Málaga as an emerging tech hub that has attracted companies like Google, Oracle, and Vodafone. 

When OpenAI’s DALL-E 2 image generator came out in 2022 though, Cuenca realized everything was about to change and he pivoted hard into generative AI. Freepik began offering tools that combined AI image-generating models with editing tools. Last year, he pivoted even further and pushed the company into AI video generation. 

Today, the business is generating $230 million in annual recurring revenue, with video accounting for roughly half of the revenue, Cuenca tells Fortune exclusively. And given that its business has changed so much from its initial days as a stock imaging platform, the company is changing its name from Freepik to Magnific.

“We are creating a new economy,” says Cuenca, who is the CEO. “It’s not that we are getting users from any particular competitor, it’s that people are finding that they can do a new thing that was not possible before.”