Arcade, a startup that specializes in AI agent infrastructure, has secured $12 million in funding from Laude Ventures. The company was founded by Alex Salazar, a former executive at Okta, and Sam Partee, a former engineer at Redis.

Laude Ventures is a new fund established in 2024 by Andy Konwinski, the co-founder of Perplexity and Databricks, as well as a UC Berkeley computer scientist. This investment in Arcade marks the first publicly announced funding by Laude Ventures.

According to Pete Sonsini, co-founder and general partner at Laude Ventures, this is not the only investment the firm has made, but it is the first one to be publicly disclosed. Sonsini has a reputation for leading early investments in successful companies such as Databricks, Anyscale, and Perplexity during his time at NEA.

Alex Salazar is a seasoned founder, having previously sold his authentication API startup, Stormpath, to Okta in 2017. He then spent several years at Okta, serving as a vice president and building products. Sam Partee, on the other hand, has experience building LLM-based applications and contributing to open-source projects like LangChain and LlamaIndex.

The idea for Arcade was born when Salazar witnessed the launch of ChatGPT 3.5 and envisioned the potential of AI agents. The company was founded in February 2024, with Salazar and Partee initially attempting to build a site reliability agent that could compete with companies like Data Dog.

However, they soon discovered that most AI agents were not effective, primarily because they were trained on public data rather than private data. This limitation hindered their ability to perform tasks that required access to sensitive information.

Salazar and Partee encountered significant challenges in developing their agent, including difficulties in connecting to other services and obtaining the necessary data. They realized that many agents struggled with these issues due to their reliance on publicly trained LLMs.

To address this problem, the founders of Arcade decided to create a tool-calling platform for their site reliability agent, similar to how Okta had previously simplified access to SaaS cloud services. This platform enabled their agent to access the required data and services.

The response to their demo was unexpected, as potential customers were more interested in the underlying technology that enabled the agent to function rather than the agent itself. This led Salazar and Partee to reconsider their approach and focus on selling the tool-calling platform instead.

Arcade’s platform grants AI agents the same privileges and access to apps and data as human workers, allowing them to perform tasks more effectively. The company offers usage-based pricing and subscriptions for its platform, which integrates with OAuth to handle authentications for thousands of SaaS services and websites.

Arcade also acts as an intermediary, providing secure token management to prevent LLMs from accessing sensitive credentials. This approach has garnered attention from investors like Pete Sonsini, who has a history of backing technical founders and has a strong connection to the research community.

Sonsini expressed his enthusiasm for Arcade, stating that the company falls within his area of focus on infrastructure, where billion-dollar businesses can be built. He believes that many AI startup founders are distracted by the “shiny object” of LLMs, whereas Arcade is focused on the critical underlying infrastructure.