Here is the English translation:
The "hunting" in Silicon Valley is similar. Within just four days, three tech giants made moves on generative AI startups. On August 3rd, Google spent $2.5 billion to "buy back" the 30-person team from Character.AI. On August 1st, Microsoft officially announced OpenAI as one of its competitors in search and advertising businesses. On July 31st, Canva announced the acquisition of generative AI startup Leonardo.ai.
Tech giants like Microsoft and Google are like a pack of wolves, following AI startups. After their products are validated by the market, they quickly strike, choosing to acquire or compete, bringing AI startups into their fold to further consolidate their dominant industry positions.
Faced with the encirclement by tech giants, AI startups have different choices. Some AI startups are resisting fiercely, while many AI startups are queuing up waiting to be acquired. "A year ago, I could hardly imagine this," said an investor who has been following the AI sector for a long time.
Just a year ago, AI startups were among the most sought-after in Silicon Valley. During the hottest period, investors in Silicon Valley even had to queue up to meet with executives of star AI startups. According to market analysis firm Dealroom, global funding for generative AI startups exceeded ### $25 billion in 2023 alone, making generative AI a veritable "money-attracting" track.
Just when everyone thought the generative AI industry would continue to "sing all the way", many generative AI startups turned to embrace big internet companies, seeking acquisition. ### "Not only have star AI startups received multiple acquisition inquiries, but the inboxes of big internet companies are also filled with acquisition invitations from generative AI startups," an insider told Silicon Rabbit.
What exactly happened to generative AI companies in Silicon Valley that made them so eager to seek acquisition? How did big internet companies manage to acquire various major generative AI startups? Can the story of generative AI continue? The giants of the internet era are launching an "encirclement" against startups in the "AI-native" era, and we are also seeing ### the offensive and defensive situation between generative AI companies and big internet companies is changing.
01 Continuous Scheme, Mind Game, Turning the Tables - The 36 Stratagems of Giants Encircling AI Startups
In this generative AI "encirclement", tech giants are using the "36 stratagems" to strategically deploy against AI startups in multiple aspects.
Among them, the most eye-catching is Microsoft's ### "continuous scheme" against OpenAI.
Microsoft cleverly opened the door to OpenAI through an early investment of $1 billion, then added $2 billion to further consolidate their partnership, also making Microsoft OpenAI's exclusive cloud computing service provider.
In January 2023, when all tech companies were still watching the development of generative AI, Microsoft made another decisive move. Through a strategic investment of up to $10 billion, it firmly "bound" itself with OpenAI, the most potential AI startup at the time, in terms of funding, technology, and future profit sharing. This also made Microsoft one of the most watched tech giants in the industry, with its market value breaking the $3 trillion mark in one fell swoop.
This $10 billion cooperation is also widely talked about. According to Fortune magazine, this investment includes multiple stages: In the first stage, Microsoft has the right to 75% of OpenAI's profit sharing until it recovers its investment; In the second stage, when OpenAI's profits reach a certain amount, Microsoft's profit share will drop to 49%, while other investors and employees will have the right to the remaining profits of the company; In the third stage, when OpenAI's profits reach an even higher amount, Microsoft and other investors' shares will be returned to OpenAI's non-profit foundation.
It can be seen that Microsoft gains a lot just from the apparent benefits. Not only can it sell access to GPT through its cloud service Azure, but it can also compete directly with GPT through upcoming models. If OpenAI develops smoothly, Microsoft can not only quickly recover its $10 billion investment but also take nearly half of OpenAI's profits. From the available information, it's not an exaggeration to say that OpenAI is currently "working to pay off debt" for Microsoft.
Compared to Microsoft, Google's acquisition strategy for Character.AI is more like a carefully planned "mind game".
Internally, Google successfully persuaded its former employees - Character.AI founders Noam Shazeer and Daniel De Freitas - to give up the company they had just founded and lead key products and technologies back to Google's embrace by offering generous salary packages and playing the old employer card.
Externally, Google not only eliminated a strong generative AI competitor in advance but also struck a blow to the morale and loyalty of generative AI startup teams. It's worth noting the timing of the acquisition - Character.AI's acquisition price was much lower than the market's estimated value.
In March this year, Microsoft acquired Inflection AI for $3 billion, twice its highest valuation of $1.5 billion. But 5 months later, Character.AI's acquisition price was only half of its highest value of $5 billion, at $2.5 billion. ### The shrinking valuation of generative AI startups also vaguely reveals that people's views on the generative AI technology trend are returning to rationality.
This form of CEO acquisition is also known as ### "synthetic acquisitions." Chetan Puttagunta, partner at investment firm Benchmark, said: "These acquisitions are happening mainly because ### large tech companies face regulatory pressure for mergers and acquisitions."
In these acquisitions, investors didn't lose a penny. ### According to The Information, Character.AI's investors received at least 2.5 times their original investment. Inflection AI's investors will still get 1.1 to 1.5 times their initial investment, partly because the company may not have spent all the money it raised. Moreover, if Inflection successfully develops new AI products, its original investors may receive additional returns.
"Capable companies build their own, incapable companies buy with money." Compared to the previous two tech giants, Canva was more direct, using just one move of ### "turning the tables" to directly incorporate the entire team of generative AI startup Leonardo.ai. Graphic design giant Canva has 150 million monthly active users from over 190 countries worldwide, with an average of 200 designs created every second. The addition of Leonardo.ai undoubtedly enhanced Canva's innovative product competitiveness.
This move not only allows Canva to make up for its own shortcomings in the field of generative AI design in a short time, but also accelerates the development and iteration of its own products by leveraging Leonardo.ai's innovation capabilities and existing market foundation, making Canva stand out in the increasingly competitive AI design tool market.
Moreover, tech giants are also very good at ### "vertical and horizontal alliances" - by injecting certain funds, they bring generative AI startups into their own ecosystem.
Currently, the generative AI industry chain mainly covers from upstream data centers, computing power research and development and other infrastructure, midstream mainly responsible for AI model development and data processing and development tool processing, to downstream diversified AI application markets.
Whether it's Nvidia + AI large model startups, or Microsoft + AI application startups, by building a generative AI ecosystem, tech giants can provide more comprehensive services and solutions through the capabilities of AI startups, enhancing their competitive advantage in the market.
Nvidia is good at using this move - not only has it successively acquired AI management startup Run:ai and deep learning AI startup Deci, but it has also invested in 14 generative AI startups including Mistral AI, Cohere, Together AI, and others.
Microsoft has reached agreements with large language model companies such as Cohere and Mistral AI to bring them into the Azure platform. Mistral AI's models will be sold directly in Microsoft's cloud, becoming the second company after OpenAI to provide commercial AI models on the Azure cloud platform. Subsequently, Cohere's enterprise-grade AI models Cohere Command R and Command R+ will also be placed in Azure AI as a managed service.
In this way, Microsoft on one hand expands the influence of its Azure platform, being able to provide more diverse AI models to meet the needs of different users. On the other hand, Microsoft also adds more new customers for its Azure cloud services, driving the growth of its cloud service business.