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The Future. A run of “acqui-hires,” in which tech giants hire a startup’s employees and license its underlying technology, are reshaping the AI market. If the unique deals continue, expect AI to stealthily become almost completely centralized under Big Tech.
Generating an exit
The AI industry is contracting in a number of all-but-in-name acquisition deals.
- In March, Microsoft hired nearly all of Inflection AI’s employees who were reassigned to start a consumer AI division. It also paid roughly $650 million to license its tech.
- In June, Amazon brought on most of Adept AI’s employees and paid $330 million to license its tech — shocking for a company valued at a billion dollars last year.
- Last week, Google hired Character.AI’s researchers and influential ex-Googlers from the company — including CEO Noam Shazeer and president Daniel De Freitas. It also paid $2 billion to license its tech, which was then used to pay out the startup’s early investors.
Why did these tech behemoths choose this route instead of a clear-cut acquisition? Under the Biden administration, the FTC has been more active in challenging deals, and it’s likely that all of these potential acquisitions could’ve been blocked for being anti-competitive. With acqui-hire arrangements, tech giants technically get what they want. (Note: the FTC is still investigating Amazon’s and Microsoft’s deals.)
But for the startups themselves, the deals show that the frothy fundraising environment for AI startups may have already peaked. And considering the exorbitant cost of running AI systems, less money equals an unsustainable business. So, yeah, everyone’s running for the exit.
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