Reforged Labs shuts down as CEO says AI is closing its market opportunity

• Expansion beyond the games industry failed to gain enough traction.
• Huynh said rapid AI advances reduced the value gap Reforged Labs was selling.
• The company had raised $3.9m in seed funding in 2024.
• Reforged Labs launched an AI-powered video ad creation platform for game studios in open beta in 2024.

AI advertising startup Reforged Labs is winding down after three years due to shrinking market opportunity as advances in AI enable game studios to build more creative tools in-house.

In a LinkedIn post, Reforged Labs co-founder and CEO Robert Huynh said the company's biggest customers signed six-figure contracts, but there were too few studios operating at that scale to sustain the business. 

Attempts to expand beyond gaming also failed to gain enough traction.

“The market is small," said Huynh. “Our best customers signed six-figure contracts... but there aren't many studios at that scale. We tried expanding beyond gaming. It didn't work well enough. Then Al changed dramatically over the last few months. 

“The models became so capable that we rewrote major parts of our own product around them. And I think our customers, some of the most sophisticated teams in gaming, will soon be able to build much of this themselves

“The gap we were selling into is closing. We could have kept Reforged going as a smaller business. The revenue was real. But I'd rather end it clearly than shrink it slowly."

Closing the gap

The closure comes less than two years after Reforged Labs raised $3.9 million in a seed funding round led by DCM to strengthen its AI capabilities and improve its creative and performance models for gaming advertisements. 

The company later launched an open beta AI-powered ad creation service aimed at indie developers and smaller studios to automate the traditional process of producing video advertisements.

Huynh thanked the Reforged Labs team, customers, investors including Y Combinator, DCM Ventures and Epakon Capital, and said he intends to continue building in the future.