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Machine Heart Report

Synced Editorial Department

Will AI startups end up in big companies?

When I woke up, the "chicken-eating competition" of generative AI had shrunk again.

Startup Character.AI announced on Friday that it has signed an agreement with Google, which will give Google a non-exclusive license to Character.AI's Large Language Model (LLM) technology.

Google also announced the rehiring of Noam Shazeer and Daniel De Freitas. Noam Shazeer is the founder and CEO of Character.AI and one of the authors of the Transformer paper. He was previously a chief software engineer at Google. Daniel De Freitas is the president of Character.AI and was previously a senior software engineer at Google.

Daniel de Freitas (left) and Noam Shazeer. Image source: https://www.bizjournals.com/sanjose/inno/stories/news/2023/03/24/qa-interview-with-characterai-founders.html

In 2021, Noam Shazeer and Daniel De Freitas left Google due to frustration with the search giant's bureaucracy and founded Character.AI in 2022. Now, they are returning to Google DeepMind with a research team of about 30 people.

“We are particularly pleased to welcome back Noam, a distinguished researcher in the field of machine learning,” a Google spokesperson said in an email.

The remaining approximately 140 employees of Character.AI will stay and face the decision of their next step. Character.AI officially released an open letter, which reads as follows:

In 2022, we founded Character.AI to bring personalized superintelligence to users around the world. Over the past two years, we have made tremendous progress toward this goal. We built increasingly intelligent models, launched immersive new features for conversations with virtual characters, and quickly grew to serve millions of users and become a part of their daily lives.

When Noam and Daniel founded Character.AI, our goal of achieving personalized superintelligence required a full-stack approach. We had to pre-train and post-train models to ensure that users had a unique experience on Character.AI and build a platform that could be used by users around the world. However, in the past two years, the technology landscape has changed - there are now more pre-trained models available. Given these changes, we believe it would be advantageous to jointly leverage third-party large language models (LLMs) and our own models. This allows us to invest more resources in post-training and creating new product experiences for our growing user base.

We are excited to announce that we have reached an agreement with Google that will enable us to accelerate our progress. Under the agreement, Character.AI will provide Google with a non-exclusive license for our existing LLM technology. This agreement will provide Character.AI with more funding to continue to grow and focus on building personalized AI products for users around the world.

Noam, Daniel, and some members of our research team will also join Google. Most of the talented Character.AI team members will remain with the company to continue building Character.AI products and serving our growing user base.

Dominic Perella, Character.AI’s general counsel, has assumed the role of interim CEO. Perella, a former longtime executive at Snap Inc., has been a member of Character.AI’s core leadership team since mid-2023. The changes are effective immediately.

As we enter the next phase of growth, we will continue to invest in our post-training capabilities, flexibly using large language models, either our own or available externally. We are excited about the future of Character.AI and are committed to serving our users with innovative products.

We are incredibly grateful to Noam, Daniel, and the rest of the team for making Character.AI a dream come true. We look forward to building on their contributions as Character.AI navigates its next phase of growth.

While technically no shares of the company changed hands, Google will pay Character.AI's investors the value of their equity at a valuation of $2.5 billion.

Character.AI employees will also receive cash at that valuation based on their vested shares, and they will also be paid out as their existing shares transfer over to vest, according to sources.

Character.AI, which had previously raised $193 million in venture capital from investors including Andreessen Horowitz at its last known valuation of $1 billion, has also been in talks to raise hundreds of millions of dollars from Google.

The agreement is similar to deals Microsoft Corp., Amazon.com Inc. and others have struck with startups in recent months that are under scrutiny from regulators as tech giants invest billions of dollars to bolster their AI infrastructure and recruit the best researchers from startups.

In March this year, Microsoft paid $650 million to bring in the co-founders and dozens of employees of AI startup Inflection. Mustafa Suleyman, former CEO of Inflection, has become Microsoft's executive vice president and CEO of the newly established Microsoft AI organization.

Former Inflection CEO Mustafa Suleyman.

Similarly, in June, Amazon hired several co-founders and employees from another AI startup, Adept.

This strategic deployment of recruiting talents from AI startups to expand their wings and empower business redevelopment has begun to take shape. The "encroachment" of large technology companies on AI startups may have just begun.

https://www.theverge.com/2024/8/2/24212348/google-hires-character-ai-noam-shazeer

https://www.reuters.com/technology/artificial-intelligence/google-hires-characterai-cofounders-licenses-its-models-information-reports-2024-08-02/

https://blog.character.ai/our-next-phase-of-growth/