philip lelyveld The world of entertainment technology

The New A.I. Deal: Buy Everything but the Company

In 2022, Noam Shazeer and Daniel De Freitas left their jobsdeveloping artificial intelligence at Google. They said the tech giant moved too slowly. So they created Character.AI, a chatbot start-up, and raised nearly $200 million.

Last week, Mr. Shazeer and Mr. De Freitas announced that they were returning to Google. They had struck a deal to rejoin its A.I. research arm, along with roughly 20 percent of Character.AI’s employees, and provide their start-up’s technology, they said.

But even though Google was getting all that, it was not buying Character.AI.

Instead, Google agreed to pay $3 billion to license the technology, two people with knowledge of the deal said. About $2.5 billion of that sum will then be used to buy out Character.AI’s shareholders, including Mr. Shazeer, who owns 30 percent to 40 percent of the company and stands to net $750 million to $1 billion, the people said. What remains of Character.AI will continue operating without its founders and investors.

The deal was one of several unusual transactions that have recently emerged in Silicon Valley. While big tech companies typically buy start-ups outright, they have turned to a more complicated deal structure for young A.I. companies. It involves licensing the technology and hiring the top employees — effectively swallowing the start-up and its main assets — without becoming the owner of the firm.

These transactions are being driven by the big tech companies’ desire to sidestep regulatory scrutiny while trying to get ahead in  ...

See the full story here: https://www.nytimes.com/2024/08/08/technology/ai-start-ups-google-microsoft-amazon.html