Source: AFP
It’s the case of the disappearing startup: some of Silicon Valley’s most promising names in the fast-growing artificial intelligence space are being swallowed up by or joined at the hip of American tech giants.
Lacking capital, promising companies like Inflection AI or Adept have seen founders and key executives quietly exit the scene in recent months to join the world’s dominant tech companies through discrete transactions.
Critics believe these deals are takeovers in all but name and designed specifically by Microsoft or Amazon to avoid the attention of competition regulators, which the companies strongly deny.
Meanwhile, companies such as Character AI are said to be struggling to raise the cash they need to remain independent, and some, such as French startup Mistral, are believed to be particularly vulnerable to being acquired by a tech giant.
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Even ChatGPT’s creator, OpenAI, is locked into Microsoft, the world’s largest company by market capitalization.
Microsoft is helping to guarantee OpenAI’s future with a $13 billion investment in exchange for exclusive access to the startup’s top models.
Amazon has its own deal with Anthropic, which makes its own high-performance models.
‘A lot of money’
Joining the revolution brought about by the era-defining launch of ChatGPT requires a cash offering that only tech giants like Microsoft, Amazon or Google can afford.
“Those with big money set the rules and design the outcomes in their favor,” said Sriram Sundararajan, a technology investor and faculty member at the Leavey School of Business at Santa Clara University.
Contrary to the typical Silicon Valley legend, genetic AI will not be developed out of some founder’s garage.
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This type of artificial intelligence, which creates human-like content in seconds, is a special set of technology that requires colossal levels of computing from specialized servers.
“Startups are founded by former research leaders at large tech companies and require the resources that only large cloud providers can provide,” said Brendan Burke, an AI analyst at Pitchbook, which tracks the venture capital world.
“They’re not following the traditional entrepreneurial journey of doing more with less, they really want to recreate the conditions they experienced working in a highly funded research lab.”
Many of these founders, including those at Inflection or Adept, came from Google or OpenAI.
Mustafa Suleiman, the former boss of Inflection, was a leader at Google DeepMind — and now he’s left his startup, with key employees in tow, to run the consumer AI division at Microsoft.
The slope is still there on paper, but it has been stripped of the very elements that gave it value.
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Aligning with the big tech companies “makes a lot of sense,” said Abdullah Snobar, executive director of DMZ, a startup incubator in Toronto. Their deep pockets help keep “the wheels greased and things moving.”
“Sucking all the juice”
But aligning with established tech giants also risks “killing competition,” potentially creating a situation where “those big three tech companies (suck) all the juice” of creativity and innovation, he added.
The burning question in Silicon Valley is whether government regulators will do anything about it.
Big tech companies are increasingly in the spotlight for their appetite to destroy smaller businesses.
Israeli cybersecurity firm Wiz this week scrapped plans to sell to Google in what would have been the giant’s biggest deal ever — reportedly because the takeover would not have survived competition regulators.
For Inflection, antitrust regulators in the United States, the European Union and Britain have said they will closely scrutinize its ties to Microsoft. Amazon’s deal with Adept has raised questions at the Federal Trade Commission in Washington.
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John Lopatka, a law professor at Penn State University, said “antitrust authorities will have a hard time blocking the arrangements” with Inflection and Adept.
However, that “doesn’t mean they won’t try.”
US, European and UK regulators signed a joint statement on Tuesday, insisting they won’t let big tech companies crack down on the nascent artificial intelligence industry.
It’s a sign that “regulation is approaching artificial intelligence,” Sundararajan warned.
Source: AFP
