Character.AI Signs Licensing Agreement with Google

Startup Character.AI announced on Friday that it has entered into a non-exclusive licensing deal with Alphabet’s Google. This agreement grants Google access to Character.AI’s large language model technology.

The deal is part of a broader trend where major tech giants are securing AI technologies from startups to enhance their AI capabilities.

Key Points of the Agreement:

Rejoining Google: The agreement will see Character.AI co-founders Noam Shazeer and Daniel De Freitas return to Google, where they previously worked. This move is expected to bolster Google’s AI research efforts.
Funding and Leadership Changes: Character.AI will receive additional funding from Google, although the exact amount has not been disclosed. Dominic Perella, Character.AI’s general counsel, will immediately step in as interim CEO.

Industry Context and Scrutiny:

The licensing deal with Google follows similar agreements between major tech firms and AI startups:

Microsoft: In March, Microsoft invested $650 million to acquire co-founders and staff from AI startup Inflection.
Amazon: In June, Amazon hired several co-founders and employees from Adept, another AI startup.

These moves are part of a larger strategy by tech giants to enhance their AI infrastructure and recruit top talent from innovative startups.

The increasing frequency and scale of such deals have attracted scrutiny from regulators in both the U.S. and Europe, who are concerned about consolidating AI resources and the potential impact on competition.

Funding and Valuation:

Character.AI, which previously raised $193 million from investors including Andreessen Horowitz, was reportedly discussing with Google to secure additional funding in the hundreds of millions. In comparison, Inflection and Adept have raised $1.3 billion and $415 million, respectively.

Advisory and Legal Representation:

The law firm Sullivan & Cromwell advised Character.AI on the licensing agreement with Google. This move highlights the growing legal and financial complexities of high-profile AI deals.

Implications for the AI Industry:

The deal underscores the competitive landscape of the AI industry, where major tech companies are aggressively acquiring technology and talent to stay ahead. It also reflects the increasing intersection of corporate strategy and regulatory oversight in the rapidly evolving AI sector.