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Last year, AI startups were the most popular in the capital market, attracting billions of dollars in investment. However, with the growing skepticism of AI technology, coupled with the high cost and long return period of generative AI technology, many startups found themselves unable to continue, and many of them were forced to choose to "sell themselves" to survive.

Under strict monopoly supervision, Silicon Valley's technology giants have come up with a unique way to extend a "helping hand" through "talent acquisition" + technology licensing.

For example,Google parent company Alphabet recently reached a deal with Character.AI, acquiring the company's technology and talent resources for a $2 billion licensing fee.Character.AI co-founders Noam Shazeer and Daniel De Freitas will return to Google, both of whom are former Google employees.

This new type of acquisition allows technology giants to acquire the core technology and talent of start-ups by paying high technology licensing fees, while avoiding the regulatory scrutiny that may come with direct acquisitions.

According to people familiar with the matter, Google and Character.AI considered a direct acquisition, but ultimately decided to circumvent regulatory scrutiny by acquiring talent and technology.

Three AI unicorns have been acquired by large companies

Coincidentally,Amazon and Microsoft have previously reached cooperation with two AI unicorns, Adept AI and Inflection, respectively, in a similar manner.

Microsoft pioneered the "talent acquisition" model. In March of this year, Microsoft poached almost all of Inflection's employees, established a new consumer AI department, and paid approximately US$650 million to purchase its technology license.

According to media reports, in June this year, Amazon reached an agreement with Adept AI to hire most of the startup's employees and pay approximately US$330 million to license its technology.

That sum, combined with Adept's remaining cash, was enough to repay investors, but it was a sad end for a unicorn that was valued at $1 billion last year.

The Dilemma of Startups

The main dilemma facing AI startups today is that the development and maintenance of generative AI requires hundreds of millions of dollars in upfront investment, which is often difficult to reap in the short term. Many startups find that they simply do not have enough resources and channels to achieve this goal.

“There are a lot of companies that are raising money based on a grand vision but without concrete examples and real details,” said Shaun Johnson, founding partner of AI venture capital firm AIX Ventures.

However, the market's skepticism about the monetization capabilities of AI has intensified recently, coupled with the intensification of fears about economic recession, U.S. technology stocks have plummeted, and the Nasdaq Composite Index has fallen 13% in the past month.

Investors’ patience with startups is also decreasing, with more and more investors withdrawing from the AI ​​game, forcing some startups to seek new financing channels and partners.

Regulators' attention

"Talent acquisition," or acquiring a company by hiring all of its key employees, is a common tactic used by tech giants to circumvent traditional acquisition processes and regulatory scrutiny.Hiring a startup's key employees in exchange for using the technology, acquiring the technology by paying licensing fees, is unusual.

As more and more AI startups are being acquired by large companies through "talent acquisition" + technology licensing, regulators have once again become alert.

The report quoted industry insiders as saying that the US government is stepping up actions to prevent such disguised acquisitions.

The U.S. Federal Trade Commission (FTC) is investigating Amazon's deal with Adept AI and Microsoft's deal with Inflection to determine whether the deals appear to have been designed to avoid regulatory scrutiny.

“The tech giants know that the days when they could buy hundreds of small companies without raising (regulatory) challenges are over,” said John Newman, a law professor at the University of Miami who focuses on antitrust and competition law.