AI start-ups swop independence for Big Tech’s deep pockets
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Big tech companies are increasingly in the spotlight for their appetite to eat up smaller firms.
PHOTO: PEXELS
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WASHINGTON - It is the case of the vanishing start-up: Some of Silicon Valley’s most promising names in the fast-developing generative artificial intelligence (AI) space are being gobbled up by or tied to the hip of US tech giants.
In the past few months, promising companies such as Inflection AI and Adept, short on funds, have seen founders and key executives quietly exit the stage to join the world’s dominant tech companies.
Critics believe these deals are acquisitions in all but name and have been specially designed by Microsoft or Amazon to avoid the attention of competition regulators, a charge the companies strenuously deny.
Meanwhile, firms like Character AI are reported to be struggling to raise the cash needed to remain independent, and some, like French start-up Mistral, are thought to be especially vulnerable to being bought out by a tech giant.
Even ChatGPT’s creator OpenAI is locked in a relationship with Microsoft
Amazon has its own deal with Anthropic, which makes its own high-performing models.
‘Big money’
Joining the revolution brought by the era-defining release of ChatGPT requires a supply of cash that only tech behemoths like Microsoft, Amazon or Google can afford.
“The ones with the big money define the rules and design the outcomes that play in their favour,” said Mr Sriram Sundararajan, a tech investor and adjunct faculty member at Leavey School of Business at Santa Clara University.
Breaking from typical Silicon Valley legend, generative AI will not be developed out of some founder’s garage.
That type of AI, which creates human-like content in just seconds, is a special breed of technology that requires colossal levels of computing from specialised servers.
Mr Brendan Burke, an AI analyst at Pitchbook, which tracks the venture capital world, said: “Start-ups have been founded by former research leaders at big tech companies, and they require the resources that only large cloud providers can make available.”
He added: “They’re not following the traditional entrepreneurial journey of doing more with less, they’re really looking to recreate the conditions that they experienced working in a highly funded research lab.”
Many of these founders, including those at Inflection and Adept, came from Google or OpenAI.
Mr Mustafa Suleyman, the former boss of Inflection, was a leader at Google DeepMind – and has now left his start-up, with key employees in tow, to head up the consumer AI division at Microsoft.
Inflection still exists on paper but has been stripped of the very assets that gave it value.
Lining up with the big tech companies “makes a lot of sense”, said Mr Abdullah Snobar, executive director at DMZ, a start-up incubator in Toronto. Their deep pockets help keep “the wheels greased and things moving forward”.
‘Sucking up all the juice’
But aligning with established tech behemoths also risks “killing competition”, potentially creating a situation where “these three big tech companies (are) sucking up 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 eat up smaller firms.
Israeli cyber-security company Wiz last week scrapped plans to sell to Google in what would have been the giant’s biggest deal – reportedly because the buyout would not have survived competition regulators.
For Inflection, anti-trust regulators in the United States, European Union and Britain said they would look closely at its ties with Microsoft. Amazon’s deal with Adept has raised questions with the Federal Trade Commission in Washington.
Penn State University law professor John Lopatka said “antitrust enforcers would have a difficult time blocking the arrangements” with Inflection and Adept.
However, that “does not mean they won’t try”.
US, European and UK regulators on July 22 signed a joint statement insisting that they would not let big tech companies run roughshod over the nascent AI industry.
It is a sign that “regulation is catching up to AI”, warned Mr Sundararajan. AFP
