new york
It’s a story of a disappearing startup: Some of Silicon Valley’s most promising names in the fast-developing field of generative AI are being swallowed up or attached to US tech giants.
A lack of funding has seen promising companies like Inflection AI and Adept in the past few months see their founders and key executives quietly exit the scene to join some of the world’s leading technology companies through separate transactions.
Critics believe the deals are acquisitions in name only, specifically engineered by Microsoft and Amazon to avoid scrutiny from competition regulators, a charge the companies strongly deny.
Meanwhile, companies like Character AI are reportedly struggling to raise the capital they need to remain independent, and some, like French start-up Mistral, are considered particularly at risk of being acquired by a tech giant.
Even ChatGPT developer OpenAI has ties to Microsoft, the world’s largest company by market capitalization.
Microsoft will future-proof OpenAI with a $13 billion investment in exchange for exclusive access to the startup’s industry-leading models.
Amazon has its own deal with Anthropic, which makes its own high-performance models.
To participate in the revolution brought about by ChatGPT’s era-defining release, you need the kind of funding that only tech giants like Microsoft, Amazon, and Google can provide.
Contrary to typical Silicon Valley myth, generative AI isn’t developed in a founder’s garage.
This kind of artificial intelligence is a special kind of technology that requires huge levels of computation from dedicated servers.
“Startups are founded by former research leaders from large tech companies and need the resources that only the major cloud providers can provide,” said Brendan Burke, AI analyst at PitchBook.
“Instead of taking the traditional entrepreneurial path of doing more with less, they are trying to recreate the situations they experienced when working in heavily funded laboratories.”
Many of the founders, including those of Inflection and Adept, hail from Google and OpenAI.
Inflexion’s former president, Mustafa Suleiman, was a leader at Google’s DeepMind before leaving the startup, taking key employees with him, to head Microsoft’s consumer AI division.
The change still exists on paper, but the very elements that gave it value have been lost.
Partnering with a big tech company “makes a lot of sense,” says Abdullah Snover, executive director of DMZ, a Toronto startup incubator, whose deep pockets can help “smooth things forward.”
But partnering with existing tech giants also risks “killing competition,” he added, and could create a situation where “these three big tech companies suck out all the creative and innovative energy.”
