PayPal Ventures and General Catalyst invest $18 million in Kite AI to develop Layer1 infrastructure for AI agent economy, signaling a strategic move towards stablecoins and automated micro-payments.

Executive Summary

PayPal Ventures and General Catalyst led an $18 million Series A funding round in Kite AI, a startup focused on building a Layer1 blockchain infrastructure tailored for AI agent micro-transactions. This investment highlights a growing interest in AI-centric blockchain solutions and PayPal's strategic move to address the evolving landscape of digital payments.

The Event in Detail

Kite AI, formerly known as Zettablock, secured $18 million in a Series A round, bringing its total funding to $33 million. The round was led by PayPal Ventures and General Catalyst, with participation from investors across crypto, finance, and technology, including Samsung Next, SBI US Gateway Fund, 8VC, Vertex Ventures, Hashed, HashKey Capital, Avalanche Foundation, LayerZero, and Animoca Brands. Kite AI is developing AIR (Agent Identity and Resources), which includes Agent Passport (a cryptographic identity layer) and an Agent App Store (a marketplace for AI agent services). Stablecoins are intended to act as the settlement layer, enabling millisecond-level payments.

Market Implications

This investment signals a significant validation of the "agentic economy" concept, where AI agents operate autonomously, conducting micro-transactions and interacting with decentralized applications at machine speed. PayPal's involvement suggests a proactive approach to integrating with this emerging ecosystem, potentially influencing other major payment companies to explore similar ventures. Alan Du of PayPal Ventures stated that Kite is addressing the payments gap for autonomous AI, as existing methods cannot handle micro-transactions at machine speed.

Expert Commentary

Alan Du of PayPal Ventures said Kite is solving a major issue in agent-to-agent payments. Existing methods like virtual cards can't handle micro-transactions at machine speed. He explained that Kite's system allows low-cost, instant settlement using stablecoins, while removing chargeback risks.

Steve Everett, head of global market development at PayPal's crypto division, added that systems like Kite's could underpin “a truly global, automated economy where people, enterprise and machine can interact with ease and trust.”

Broader Context

Kite AI is building a blockchain foundation for the AI agency economy, envisioning AI agents as a new category of users in the Web3 ecosystem. The company's focus on integrating identity, payment, and behavior verification into a unified protocol layer aligns with the increasing demand for secure and scalable AI-driven applications. Kite AI's infrastructure stems from years of experience powering networks like Polygon, Chainlink, and Sui. The platform's architecture incorporates programmable governance features based on identity, allowing for fine-grained automated permission control.