Adept, a 2-year-old AI startup that has raised more than $400 million in funding, is in talks with Microsoft, according to three sources familiar with the matter. Microsoft, which has invested in Adept and has a commercial agreement with the company, said it has no plans to acquire the company.
“We have no intention of acquiring the company in whole or in part,” Microsoft spokesman Frank Shaw told Fortune shortly after this article was published.
Two of the sources said: luck Adept received and signed a term sheet from Microsoft, but details or monetary value are unclear. The deal was not a standard acquisition, according to both sources, who said they learned about it from a senior Adept official with direct knowledge of the matter.
Microsoft has been aggressively moving to transform itself into an AI powerhouse in recent years. The software giant has invested $13 billion in ChatGPT developer OpenAI, as well as smaller investments in several other startups, including France’s Mistral. In March, it hired the senior leadership team of Inflection AI, a startup that’s been making waves for its AI chatbots.
Adept was founded in 2022 by OpenAI and Google veterans, including several co-authors of the now-famous 2017 research paper that created the neural network architecture called Transformers upon which much of the generative AI boom was built.
Adept showed off some flashy product demos in 2022 but has struggled to land large commercial customers for its software. In late 2022, Adept’s two co-founders, Ashish Vaswani and Niki Parmar, left the company to launch their own startup, Essential AI, which is pursuing a similar idea of ​​using transformers to create AI agents that can help businesses. In May, The Information reported that Adept was exploring a possible sale or strategic partnership with companies including Meta.
Adept was founded on the idea of ​​using Transformers, but not to generate text, as is the case with large-scale language models (LLMs) that underpin consumer chatbots such as OpenAI’s ChatGPT. Instead, Adept planned to use Transformers to create an AI assistant for business that could automate any workflow and perform tasks using any business software. These tasks could range from extracting numbers from documents and pulling them into spreadsheets to running analysis of financial numbers to create charts and graphs and generate PowerPoint sales decks based on the analysis.
Adept, like Inflexion, is backed by Silicon Valley venture capital firm Greylock Partners. Both startups have also received investment from Microsoft. According to a March 2023 survey, Forbes The report, citing anonymous sources, said Adept was valued at “at least” $1 billion when it raised $350 million in Series B funding from General Catalyst and Spark Capital.
It could be controversial if Microsoft were to use a deal structure for Adept similar to the one it used for Inflection. Microsoft hired Inflection co-founder and CEO Mustafa Suleiman in March, along with most of the company’s researchers and AI engineers, but did not formally acquire the company. Instead, it paid Inflection investors $650 million in fees to license the rights to Inflection’s technology. Microsoft did so despite saying it had little interest in the products Inflection developed. A Microsoft spokesman said at the time that the payment was necessary to fully compensate Inflection investors and to forestall lawsuits that employees who joined Microsoft were somehow stealing Inflection’s trade secrets. Microsoft denied criticism that the structure had another purpose: to avoid antitrust regulators blocking the deal.
The US Federal Trade Commission has launched an investigation into the Microsoft-Inflexion deal, but the UK competition authority determined after a preliminary investigation that it could not take any action against Microsoft because the deal was not structured as a traditional acquisition.
update: This story has been updated to include a comment from Microsoft saying it is not interested in acquiring Adept.
