(Bloomberg) -- Character.AI’s co-founders are joining Google in a larger deal that will allow the search giant to license the artificial intelligence startup’s technology.
Character.AI, a startup known for chatbots that can mimic anyone or anything, announced the news in a blog post on Friday. Founders Noam Shazeer and Daniel De Freitas, along with some members of its research team, will join Alphabet Inc.’s Google, the company said. The startup’s new interim chief executive officer will be Dominic Perella, who had been Character.AI’s general counsel.
Existing investors will see shares bought out at a price that would translate to a $2.5 billion valuation for the company, according to a person familiar with the matter who asked not to be identified discussing private information. That’s significantly higher than its earlier valuation of $1 billion. However, it’s still short of the heady $5 billion value it discussed in early talks with investors last year, according to Bloomberg.
The Menlo Park, California-based startup will enter into a non-exclusive licensing deal with Google for its large language model technology, it said. And Character.AI will continue to exist. “Most of Character.AI’s talented team will remain and will continue to build the Character.AI product and serve our growing base of users,” the startup wrote in the blog post.
Character.AI is not the only buzzy AI startup to see its founders go to a large tech company as the race for AI talent and technology accelerates. Microsoft Corp. hired two co-founders of AI startup Inflection AI along with much of its staff in March. And in June Amazon brought on top executives and other employees from startup Adept AI Labs Inc. for its AGI autonomy team.
For Character.AI’s founders, the deal represents a homecoming of sorts. Shazeer and De Freitas both previously worked at Google. During his first stint at the tech giant, Shazeer co-authored “Attention Is All You Need,” a seminal paper on generative AI. But as of July 2023, all eight authors of the paper had left Google, many launching high-profile AI startups of their own.
The release of OpenAI’s ChatGPT in late 2022 sparked a panic inside the search giant about how the company had been leapfrogged in a field where it had made so many breakthroughs. Over the past 18 months, Google has made various moves to right the ship. The company merged its premier AI labs to form Google DeepMind and installed AI luminary Demis Hassabis as chief.
In a statement, a Google spokesperson said the company is “particularly thrilled” to welcome Shazeer back to the company; he will be joining the DeepMind research team with “a small number of his colleagues.” Shazeer said he is “super excited to return to Google and work as part of the Google DeepMind team,” in a statement. “I am so proud of everything we built at Character.AI over the last 3 years.”
He added that he believes the funds from Google will help position Character.AI for “continued success in the future.” The startup declined to comment beyond the blog post.
News of the deal comes after reports that the company had received acquisition interest from Elon Musk’s xAI.
The original idea behind Character.AI was to create an open-ended system that lets people mold AI technology into a variety of services or products. Last year, the pair spoke hyperbolically to Bloomberg News about their goal for the startup which, as De Freitas put it, is to give every person access to their own “deeply personalized, super intelligence to help them live their best lives.”
Character.AI lets anyone make their own customized chatbot, impersonating anyone and anything — living, dead, or imaginary. People have made millions of chatbots, or “characters,” and some of them are popular conversation partners. For instance, users have sent about 371 million messages to Raiden Shogun and Ei, a bot that mimics a character in the video game Genshin Impact.
The company has recently branched out beyond just text-based chatbots. In June, Character.AI rolled out a feature called Character Calls that lets people call chatbots via the app. It also said that people had made more than a million voices with a feature called Character Voice, which rolled out generally in March.
Last year, a return to Google seemed unlikely as Shazeer stressed the benefits of working at a startup over a tech giant. “Some things are easier to do as a startup,” he said when speaking to Bloomberg News at the time. “So we decided to do our own thing.”
(Updates with new details in the third paragraph)
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