Google takes another startup out of the AI race

Yet another buzzy AI startup has been taken off the playing field.

This time, Google has hired back the AI leadership of Character.AI, including co-founders Noam Shazeer and Daniel De Freitas. Both men famously left Google to start Character in 2021 because, as Shazeer has said publicly, they were frustrated by the search giant’s bureaucracy. A few years later, they are returning to work in Google DeepMind, along with their research team of about 30 people. Character.AI’s roughly 140 remaining employees are being left behind to figure out what’s next.

The surprise “agreement” with Google is a strange one on multiple levels. For one, while no company shares are technically changing hands, investors in Character.AI are being paid for the value of their equity by Google at a valuation of $2.5 billion. Sources also tell me that employees are receiving cash at that valuation commensurate with their vested shares, and they’ll keep getting payments at that price as their existing stock grants continue to vest. (Character.AI raised about $150 million to date and its last known valuation was $1 billion.)