Character.AI told staff that investors will be bought out at a valuation of ~2.5x its $1B 2023 valuation, and it plans to adopt open-source models for products
and what we don't X: @swyx : Ok after some reading whining about the broken founding employee contract I actually did some research: - Adept stock is getting bought at par - Inflection stock getting bought at 1.5x - Character stock getting bought at 2.5x I think this means employees are being at least made Dare Obasanjo / @carnage4life : Amazon & Adept AI, Microsoft & Inflection AI and now Google & Character AI. Technically not an acquisition but they pay off the investors and hire away the CEO and all the key people. This is an incredible antitrust loophole if they all get away with it. https://www.theinformation.com/ ... Ed Zitron / @edzitron : I mean, it sure seems like Character is dying or dead? What's the point of this company if they no longer use their own models and switch to open source ones? https://www.theinformation.com/ ... [image] Karthik Hariharan / @hkarthik : Big Tech is buying AI talent without actually buying the companies they started. Google just hired the CEO of https://character.ai/ and several of their team back to Google. On paper, it's not an acquihire, Google is licensing some of the company's tech. Investors plowed Dylan Patel / @dylan522p : VCs keep taking L's from big tech, the one they love to say they will disrupt. First Microsoft Inflection Then Amazon Adept Now Google Character Who is next? Meta Mistral? TBF, Inflection and Character especially have had pretty good returns for the shareholders. Amir Efrati / @amir : Andreessen and Greycroft are going to end up making a little money from the Google-Character acquihire. https://www.theinformation.com/ ... @KalleyHuang [image] Bryce Roberts / @bryce : “a little money” on a billion dollar outcome. Welcome to the new reality of venture... Forums: Msmash / Slashdot : Google Hires Character.AI Cofounders and Licenses Its Models
Context & Ripple Effects
Character.AI had raised $150 million at a $1 billion valuation and signaled an interest in strategic partners, setting up the investor-return question now being addressed by the company. Its earlier $1 billion financing made a 2.5x buyout valuation a meaningful, if different, outcome from a new standalone funding round.
The company had also explored research partnerships that would trade access to its IP for computing resources. Those talks over compute access provide context for a model strategy that shifts product development toward open-source models while Google licenses Character.AI technology and hires key personnel.
First-order effects
- Character.AI investors are slated for liquidity at roughly 2.5 times the company’s 2023 valuation, while the company avoids a conventional acquisition structure.
- Character.AI’s remaining product organization must operate with open-source models after Google licenses its technology and recruits its CEO and several key team members.
Second-order effects
- The arrangement gives Google access to talent and technology without taking ownership of Character.AI, while leaving the startup to preserve its chatbot product and investor obligations.
- Other AI startups seeking scarce compute or commercialization partners may face stronger pressure to consider licensing-and-talent arrangements rather than rely solely on follow-on venture funding.
Third-order effects
- If repeated, these structures could further separate ownership of AI products from control of the researchers and model capabilities that create them, concentrating frontier talent around large platforms.
- The pattern may draw greater scrutiny of transactions that function like acquisitions economically while being organized as licensing, investor payouts, and hiring agreements.
The trend: This is one data point in the concentration of frontier-AI talent and capabilities within large platforms through licensing and recruiting deals rather than standard acquisitions.