Artificial Agency raises $16M to use AI to make NPCs feel more realistic in video games

A group of former Google DeepMind researchers has created an AI behavior engine that aims to transform traditional video games into a more dynamic experience by improving how non-playable characters (NPCs) behave and interact with gamers.

There’s no shortage of companies using AI to generate NPCs that feel more realistic, but Canada-based Artificial Agency, fresh out of stealth with $16 million in funding, is betting its behavior engine will help it stand out from the pack.

Traditionally, NPCs are guided by decision trees and pre-written scripts, which often limit the number of outcomes a player can experience. For example, most NPCs in games respond to player behavior with a few repetitive dialogues, which can often feel unrealistic and boring.

Artificial Agency’s behavior engine throws this framework out the window, turning the game developer into more of a stage manager. The engine requires developers to give each NPC a set of motivations, rules and goals to live by, which then dictates how the NPC will respond to the player. The technology can plug into existing video games or serve as the basis for completely new ones.

The startup, based out of Edmonton, Alberta, is entering an increasingly crowded space. Competitors include Inworld, which also offers AI-generated behaviors for NPCs, as well as Nvidia, which has been working on AI-powered NPCs for some time now.

Artificial Agency, for its part, believes that integrating AI-generated NPCs into a video game’s design is the way forward.

“The conversations we often have with these studios are not about if, it’s about when,” co-founder and CEO Brian Tanner told TechCrunch. “This sort of dynamic interaction and dynamic response that our system allows is going to be table stakes in the games industry just a few years from now.”

The startup recently raised $12 million in a seed round co-led by Radical Ventures and Toyota Ventures, the founders told TechCrunch. It had previously raised $4 million in an undisclosed pre-seed round from Radical Ventures, bringing its total raised to $16 million. Other participants in the latest seed round were Flying Fish, Kaya, BDC Deep Tech and TIRTA Ventures.

Who wants AI NPCs?

A big question for many of these startups is whether gaming studios will even adopt their AI technology. Some worry that the big studios will develop the technology themselves or may hesitate to add generative AI to their flagship games, especially given the risk of hallucinations and how untested the technology still is.

While it wouldn’t name them, Artificial Agency says it’s working with “several notable AAA studios” to develop its behavior engine, and expects the technology to be widely available in 2025.

“When we reached out to gaming studios, some were starting to build some of these behaviors themselves, when in reality, they’re just trying to build games,” said Radical Ventures investor Daniel Mulet. “Once you see like 20, 30 groups that are trying to build this themselves, there is an opportunity to build a platform and make it available to everyone.”

Generally, game developers seem to be open to using generative AI to build games, but there’s still some hesitancy. Nearly half of the 3,000 game developers surveyed by GDC and Game Developer for the 2024 State of the Game Industry report said they use generative AI in some aspect of their development process, particularly for repetitive tasks. Still, only about 21% of those surveyed expect generative AI to have a positive impact on the industry, and 42% of respondents were “very concerned” about the ethics of using generative AI.

Mulet said Artificial Agency’s founding team, with decades of experience in Google DeepMind, gave him confidence that it can build a best-in-class tooling layer to improve how NPCs behave. DeepMind, after all, has a long history of developing the cutting edge in AI that can play games — it built AlphaGo, the first computer program to beat a world champion at Go.

Around the time Google was shifting focus toward the Gemini model, Tanner and his team broke away to develop video game agents that could replace NPCs.

From NPC to co-op companion

In a demo of the technology the startup shared with TechCrunch, co-founder Alex Kearney created an NPC powered by the behavior engine in Minecraft (the startup would not reveal the games it’s currently working on). The NPC, named Aaron, was instructed to be friendly and helpful, and was given access to basic functions such as movement, opening chests, digging and placing blocks.

At one point, Kearney’s in-game character asked Aaron to gather supplies for a scary mining adventure, and though it wasn’t programmed to do so, the NPC visited multiple chests to gather armor, helmets, tools and food, and delivered the supplies back to Kearney’s character. And when Kearney told Aaron she was gluten-free after it brought back some bread, the NPC apologized, and offered a gluten-free option instead: cooked chicken.

The simple demo showed how Artificial Agency’s AI NPCs could not only talk, but perform complex actions without being explicitly told to do so. Aaron showed some level of awareness, and the NPC created a unique experience with no script writing or programming required. At the very least, the technology could likely save game developers some time.

Will gamers pay the price for AI?

Tanner estimated this roughly five-minute demo cost $1 in AI inferencing costs, but he pointed out that a year ago, it would have cost $100. Artificial Agency expects costs to continue coming down, both thanks to improvement in GPU efficiencies and AI model optimizations. Currently, the startup uses open source models, including Meta’s Llama 3. A year from now, Tanner expects the five-minute demo to cost one cent or less.

But whether it costs a penny or $100, who’s going to end up paying for these inferencing costs? Artificial Agency says AI NPCs probably won’t make video games more expensive for an end user, but Radical Ventures’ Mulet wasn’t so sure. He said his venture firm is confident game studios are willing to pay to license Artificial Agency’s technology, but once it’s deployed, it could result in a monthly fee for gamers.

“The fact that there’s inference costs associated with running these systems means that it has to be a bit of a premium feature,” said Mulet. “Will you, as a gamer, pay $2.99 a month or $12.99 a month? That’s a little bit early to tell.”