A few months ago, I was sitting in the audience at a technology conference in San Francisco. BloombergEmily Chang interviews Reid Hoffman.
She asked about Microsoft’s hiring of the team at Inflection, an OpenAI competitor that Hoffman co-founded: This wasn’t an acquisition in name only, it was an acquisition in every respect, clearly designed to avoid antitrust scrutiny: Microsoft, on whose board Hoffman sits, not only hired most of Inflection’s employees, but also licensed the startup’s technology in a manner that appears designed to maximize returns for investors.
Speaking with Chan onstage that day, Hoffman predicted that what happened to Inflection would become a “pattern” for future AI deals. We’re now seeing that pattern play out.
Last Friday, Amazon announced it had raised about $400 million from top investors and would hire most of the team at Adept, another OpenAI competitor that is building, in the words of CEO David Ruan, “a new kind of massive models that turn natural language into machine actions.”
Amazon is Geekwireof Taylor Soper said it would hire 80% of Adept’s employees, including Ruan and his co-founders. In an internal memo published by the media, senior vice president Rohit Prasad said Amazon would license Adept’s technology, just as Microsoft did with Inflexion, to “accelerate our roadmap to build digital agents that can automate software workflows.”
Adept’s corporate blog post about the news suggests it’s short on cash: “Continuing with Adept’s original plan to build both useful general-purpose intelligence and enterprise agent products would have required significant attention to funding the foundational model, rather than delivering on the agent vision.” Recent reports have said the company is considering a sale.
The reality is that building cutting-edge AI models is prohibitively expensive, and even $400 million in funding today is not enough to win the race. Meanwhile, big tech companies are flush with cash and looking to get in on what everyone thinks is the next big thing. As the industry consolidates, it’s only natural that more AI startups will follow the same path as Inflection and Adept.
The problem for big tech companies is that they’re no longer allowed to buy companies the way they once did: The current antitrust enforcement regime would undoubtedly try to block Amazon’s acquisition of Adept, regardless of whether it has legal grounds for doing so. (Amazon executives are still upset about not being able to buy a robot vacuum company.)
Yet capitalism finds a way. What Microsoft did with Inflection, and what Amazon did with Adept, is the new big tech strategy to swallow the AI ​​industry and get away with it. Silicon Valley has a history of so-called “hire by acquisition,” where startups lose employees and are left to die. Microsoft and Amazon are essentially doing the opposite, “hire by acquisition,” where the employee hires and the accompanying licensing agreements are actually designed to disguise that they are an acquisition.
Meanwhile, Reid Hoffman should be commended for not only accurately predicting the future of these deals, but for more: One of Adept’s early investors was none other than his own venture capital firm, Greylock.
