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Character.AI Founders Rejoin Google in Major Licensing Deal Amid AI Antitrust Concerns

By  |  August 4, 2024

Character.AI’s co-founders, Noam Shazeer and Daniel De Freitas, are set to join Google as part of a broader arrangement allowing the tech giant to license the startup’s innovative AI technology. The announcement, made via a blog post by Character.AI on Friday, also revealed that Dominic Perella, formerly the company’s general counsel, will step in as the interim CEO.

Per Bloomberg, the deal involves a buyout of existing investors’ shares at a valuation of $2.5 billion, a marked increase from its previous valuation of $1 billion. However, this figure falls short of the $5 billion valuation discussed in earlier investor talks last year.

This mirrors a growing trend in the tech industry, where larger corporations are choosing to recruit talent from successful startups instead of pursuing traditional acquisitions. This approach helps them avoid regulatory scrutiny and stay competitive in the AI race, especially as the Federal Trade Commission (FTC) ramps up its investigations into potentially anticompetitive practices by major tech companies.

Character.AI, based in Menlo Park, California, is known for its advanced chatbots capable of mimicking a wide range of personalities. Despite the co-founders’ transition to Google, the startup will continue to operate independently and maintain its current product offerings. “Most of Character.AI’s talented team will remain and will continue to build the Character.AI product and serve our growing base of users,” the company stated in its blog post.

The arrangement with Google is non-exclusive, ensuring Character.AI retains the ability to license its technology to other entities. This move comes amid a broader trend in the AI industry, where large tech firms are increasingly absorbing talent from innovative startups. For instance, Microsoft recruited co-founders and staff from Inflection AI earlier this year, and Amazon integrated key personnel from Adept AI Labs into its AGI autonomy team in June.

For Shazeer and De Freitas, rejoining Google marks a return to familiar territory. Both have a history with the company, with Shazeer notably co-authoring the influential paper “Attention Is All You Need” during his previous tenure. The paper has become foundational in the field of generative AI. Google’s spokesperson expressed enthusiasm about the return, highlighting Shazeer’s upcoming role within the DeepMind research team.

Shazeer himself shared his excitement about rejoining Google and the potential for future advancements. “I am so proud of everything we built at Character.AI over the last 3 years,” he said, adding that Google’s resources will be instrumental in securing the startup’s continued success.

This development follows reports of acquisition interest from Elon Musk’s xAI, underscoring Character.AI’s prominence in the AI landscape. Originally conceived to offer customizable AI services to users, Character.AI aims to provide deeply personalized, super-intelligent tools to enhance individual lives, a vision that Shazeer and De Freitas articulated during their discussions with Bloomberg last year.

Source: Bloomberg