AI-Enabled Toys: The Next Big Opportunity in Smart Play & Investments
+ Batal Gaming's Kevin Harvey on seizing MENA's Biggest Gaming Opportunity
Hey founders, funds, & friends 👋,
A warm welcome to the 49th edition of the “Mehtta Ventures Dubai” investment digest newsletter, your weekly news digest about startup stories across the Middle East & India, digital / business trends shaping our lives and curated venture investment opportunities.
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Why MENA? Batal Gaming Co-Founder Kevin Harvey on Seizing the Region’s Biggest Gaming Opportunity 🎮 👇🏻
The Middle East gaming market is a massive opportunity. With over 100M + gamers and a spend rate higher than the U.S., it’s no surprise that esports is exploding across the region. But what makes MENA so unique, and why did Batal Gaming choose to start here?
In this clip of The PressPlay Podcast, I ask Kevin, what led him to launch the region’s first 1v1 competitive matchmaking platform—and his answer is eye-opening:
Unlike the U.S. or Europe, players here can’t join international platforms without a lag disadvantage, making a localized competitive ecosystem essential. Therefore the opp for MENA gamers to be locked into regional servers.
💰 Saudi gamers play more & spend more. While the average U.S. gamer plays 6 hours a week, the average Saudi gamer spends 12+ hours—and spends 2X as much on in-game content.
📈 A proven global model, adapted for MENA. Competitive gaming platforms exist in the U.S. & Europe, but most focus on wagering, which isn’t regulatory-compliant in MENA. Batal took an existing playbook, refined it for this market, and built a compliant, hyper-localized model.
This is just the start of how Batal Gaming is reshaping esports in MENA. Catch the full conversation soon on the Pressplay Podcast YouTube channel (please do subscribe to get interviews, learnings and insights from entrepreneurs building in the attention economy - Gaming, Ad Tech, Media Tech, Entertainment and Sports) where we break down the opportunities, challenges, and what’s next for gaming in the region.
Watch now & let us know—where do you see the biggest gaming opportunities in MENA? #Gaming #Esports #PressPlayPodcast Thank You Zainab Al Sharif (+VC) for the introduction!
Today’s program:
AI-Enabled Toys: The Next Big Opportunity in Smart Play & Investment
Market Outlook: A Booming Industry Ready for Disruption
What’s Driving the AI Toy Boom?
Spotlight on Curio: The Company Pioneering AI-Powered Toys
AI Toys & The Investment Potential
Final Thoughts: AI is Redefining Play—Investors Should Take Note
And….Action!
AI-Enabled Toys: The Next Big Opportunity in Smart Play & Investment
Artificial intelligence (AI) is rapidly transforming the global toy industry, redefining how children interact, learn, and engage with play. AI-powered toys are no longer just about entertainment—they now function as personalized learning companions, emotional support devices, and interactive storytellers, adapting to a child’s unique preferences and behavior.
For investors, the AI-enabled toy market represents a high-growth sector poised for significant expansion, making it a timely and lucrative opportunity to explore.
Market Outlook: A Booming Industry Ready for Disruption
The global smart AI toys market is projected to grow from $2.24 billion in 2024 to $6.45 billion by 2032, with a CAGR of 14.1% (Credence Research). Other estimates place this market even higher, forecasting a $128.5 billion valuation by 2032 at a CAGR of 20.48% (Market Research Future).
This rapid expansion is driven by:
✔ Consumer demand for interactive, educational, and screen-free engagement.
✔ AI-powered personalization that adapts learning and entertainment to children’s preferences.
✔ The rise of connected, IoT-enabled smart toys that integrate with home ecosystems.
✔ Investments from celebrities and media giants into AI-powered play experiences.
Several celebrities have shown interest in the AI-enabled toy industry, either through direct involvement or investment:
Grimes and Curio: Canadian musician and artist Grimes has collaborated with Curio to develop AI-powered plush toys, such as "Grok." She has been intimately involved in the creation, ideation, and steering of these toys, providing the voice for Grok and contributing to content development.
Robert Downey Jr. and Miko: Actor Robert Downey Jr. has invested in Miko, an AI-powered companion robot designed to educate and entertain children. His venture fund, FootPrint Coalition, participated in Miko's Series B funding round, highlighting his interest in AI and robotics.
Cher and Embodied: Singer and actress Cher invested in Embodied, the company behind "Moxie," an AI robot companion for children. She participated in a funding round to support the development of socially assistive robots aimed at promoting children's social, emotional, and cognitive development.
These collaborations and investments underscore the growing intersection between entertainment, technology, and education, as celebrities leverage their influence to promote innovative solutions in the AI-enabled toy market.
What’s Driving the AI Toy Boom?
1. The Shift in Parental Preferences
Parents are increasingly looking for alternatives to screens, seeking interactive toys that encourage learning, creativity, and social-emotional development.
AI-powered toys like Curio’s Grok, Moxie, and Miko are designed to engage children in real-world interactions, reducing passive screen time.
2. AI-Powered Personalization & Learning
Unlike traditional toys, AI-enabled toys adapt to a child’s behavior, preferences, and learning style.
These toys personalize learning experiences, helping kids develop language skills, problem-solving abilities, and emotional intelligence.
3. The Growing Influence of the Creator Economy
AI toys are blurring the lines between entertainment, education, and media consumption, integrating with streaming, gaming, and digital ecosystems.
Companies like Grimes’ Curio are leveraging celebrity-backed AI experiences to build deeper connections with digital-native audiences.
4. Privacy & Ethical Considerations
AI toys collect and store user data to improve interactions, raising privacy concerns for parents.
Regulatory oversight and responsible AI practices will be critical in shaping this market’s future.
Spotlight on Curio: The Company Pioneering AI-Powered Toys
Curio’s Mission & Vision
Founded in San Francisco, Curio is developing AI-powered interactive toys designed to educate, entertain, and engage children. The company aims to create intelligent, emotionally responsive toys that enhance creativity and reduce screen time.
Grok: The AI Toy That Thinks Like a Kid
One of Curio’s flagship AI toys, Grok, was co-created by Grimes, the musician and AI futurist.
✔ How It Works: Grok is a talking AI-powered rocket toy designed to interact with children through storytelling, conversations, and interactive learning activities.
✔ Adaptive Conversations: Grok remembers past interactions, adapting its responses and engaging kids in personalized discussions about their favorite topics.
✔ Encouraging Creativity: Instead of passively consuming content, children collaborate with Grok, building imaginative worlds and engaging in exploratory play.
✔ Tech & Data Considerations: Grok connects to an AI-driven app, raising important questions around data privacy and security.
Challenges & Opportunities
AI Limitations in Toys: Current AI technology, while advanced, still struggles with natural conversation flow—sometimes leading to frustrating user experiences - this is getting better however showcasing immense potential.
Balancing AI & Emotional Attachment: As AI-powered toys mimic human-like conversations, they raise questions about how children perceive their “intelligence” and emotional connection to them.
Potential for Expansion: Future iterations of Grok and similar AI toys could integrate with IoT ecosystems, parental controls, and educational platforms to enhance both entertainment and learning experiences.
AI Toys & The Investment Potential
For investors, the AI-enabled toy industry presents a compelling opportunity across multiple business models, including:
✔ AI-Powered Educational Toys: Startups building learning companions that personalize knowledge acquisition and skill-building.
✔ AI-Integrated Physical Play: Hybrid toys that blend traditional play with digital intelligence, creating immersive, adaptive experiences.
✔ AI & the Smart Home Ecosystem: AI toys that integrate with smart assistants (Alexa, Google Home) and IoT devices for deeper engagement.
✔ AI + Social & Emotional Learning (SEL): AI companions designed to support children's emotional and social development in an increasingly digital world.
With AI-backed innovation and a massive addressable market, early investments in this sector could deliver outsized returns in the coming decade.
VC Investments in AI-Enabled Toys:
Anki: Founded in 2010, Anki developed AI-powered toy cars that interact through a mobile app. The company secured $157.5 million in funding from prominent investors, including Andreessen Horowitz and JPMorgan Chase.
Sphero: Specializing in app-controlled robotic balls and other interactive products, Sphero has raised approximately $124.2 million since its inception. Notable investors include Foundry Group, Amazon, and Morgan Stanley.
littleBits Electronics: This company offers an open-source library of electronic modules that snap together with magnets, allowing users to learn electronics through hands-on projects. littleBits has attracted $62.3 million in investment from firms such as Khosla Ventures, Foundry Group, and DFJ Growth.
Spin Master Corp: In 2021, Spin Master launched a $100 million venture capital fund to make strategic minority investments in toys, entertainment, and digital games, signaling a strong commitment to innovation in the toy industry.
Haivivi: A Singapore-based AI toy startup, Haivivi has garnered investments from prestigious venture capital firms and industry leaders within two years of entering the AI toy sector. The company recently launched BubblePal, an AI-powered interactive toy designed to redefine playtime.
Final Thoughts: AI is Redefining Play—Investors Should Take Note
The AI-enabled toy market is more than just a tech gimmick—it represents a paradigm shift in how children learn, engage, and interact with technology. As digital-native generations grow up, the blurring of lines between education, play, and AI-driven interactivity will become the norm.
For investors looking to capitalize on the next major wave in AI and the attention economy, this sector offers a high-growth, innovation-driven opportunity with strong long-term potential.
As companies like Curio, Embodied, and Miko continue to push the boundaries of AI-powered play, the future of toys is being rewritten right now—and those who move early stand to gain the most.
Want to explore investment opportunities in AI-driven consumer technology?
At Mehtta Ventures Dubai, we are closely tracking AI-enabled toys, interactive media, and the next frontier of consumer AI. If you’re looking to invest in early-stage ventures shaping the future of play, education, and interactivity, reach out to us.
If you know of startup founders building in the “eyeball economy”, please go ahead and connect us. Let’s pay it forward together :-) 2025 it is!
Watch this space and subscribe / share with your friends.
While you wait for our next newsletter, I encourage you to check out our other newsletter / streaming consulting destination: The Streaming Lab where we cover streaming insights from MENA and India.
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