Koah Labs Inc., a company innovating around contextual advertising within generative artificial intelligence outputs, today announced it raised $20.5 million in early-stage funding led by Theory Ventures.

The Series A round builds on $5 million seed funding raised in September 2025, bringing the company’s total capital to more than $26 million.

“Generative AI has changed how people consume information, and monetization must evolve alongside it,” said co-founder and Chief Executive Nic Baird. “Subscriptions don’t scale given high inference costs, and legacy ad models erode user experience.”

The conversation around generative AI and advertising has shifted somewhat in recent months as the OpenAI Group PBC began inserting ads into its own service, ChatGPT. A prominent example includes OpenAI researcher Zoë Hitzig, who quit the company amid the decision to advertise on the AI chat service, stating that she believed it was the wrong direction.

Hitzig expressed concerns that OpenAI has been centrally collecting intimate information writ large about enormous segments of the population and could use that data to target and manipulate users.

Unlike inserting ads into an ultra-popular AI chat service that crystallized the mainstream idea that computers can talk like people, Koah provides a software development kit to monetize AI capabilities that can live inside of apps.

“We’re seeing users research, compare, and form brand preferences directly inside AI tools,” said Luke Kim, CEO of Liner, an AI search app used by more than 10 million students, academics and researchers globally. “Koah lets developers monetize those moments responsibly — without compromising trust.”

Indeed, similar to Hitzig’s thesis about manipulation, the problem is a question of user trust.

According to Koah, it frames its monetization strategy for advertising within generative AI as a new channel for offering a way for advertisers to reach audiences who might be looking for them instead of jumping out at them. As Koah says, the idea is engage users based on what they’re actively asking.

“With Koah’s expert placements, we don’t have to worry about users disengaging,” said Natalie Solano, head of product at Luzia AI, a Spanish language market-focused personal assistant. “Plus, ads are so much more likely to result in conversions.”

Generative AI is quickly becoming a conversational interface layer for not just software, but services and websites across the internet. Monetization and advertising will be inevitable, and providing developers with the infrastructure and tools to align themselves with that environment will allow them to reach audiences with appropriate ad formats.

Koah ads look like ads and do not hide themselves in the chat. They stand out with proper formatting — prominently displaying the word “Ad” — and either appear on the side or in a break within or between the conversational flow. That way, they do not manipulate or change the conversation itself.

Integrating the advertising model as a developer is so lightweight that it can be as simple as downloading the library and adding a few lines of code.

Koah said the company intends to use the new funding to build out its engineering team and marketing operations as it expands its technology stand for AI monetization.

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