Google takes Character.AI's founders back

Character.AI announced that Google had taken a non-exclusive licence to its large language model technology, and that the start-up’s co-founders, Noam Shazeer and Daniel De Freitas, were returning to Google along with some of the company’s research staff. The licensing fee was reported by multiple outlets at between $2.5 billion and $2.7 billion. Character.AI’s general counsel, Dominic Perella, became interim chief executive, and the company said it would continue operating independently, shifting its focus from training frontier models toward product.

Shazeer and De Freitas had left Google in 2021, reportedly after the company declined to release a chatbot Shazeer had built internally, and used the same underlying approach to found Character.AI. Shazeer returned to Google as a co-lead on the Gemini model effort.

No equity changed hands and no entity was acquired — the structure Microsoft had used months earlier to bring in Inflection AI’s Mustafa Suleyman, and that Amazon would use for parts of Adept AI. In each case a large platform obtained the technology and the researchers behind a well-funded start-up without a merger filing, leaving the start-up’s other investors and remaining staff with a company that had lost its most distinctive asset. Reporting later in 2024 said the Justice Department was examining whether such deals were structured specifically to avoid the antitrust review a standard acquisition would trigger.

The deal underscored how concentrated the frontier-model talent pool had become by mid-2024: a handful of researchers commanded valuations approaching those of substantial companies, and the biggest platforms found it more attractive to rent that expertise back than to compete against it in the open market.