Google strikes licensing deal with Character AI and poaches top executives for DeepMind

AI avatar company Character AI is getting close with Google. The startup today announced in a blog post that it will license its large language model (LLM) tech to Google in exchange for “increased funding for Character.AI to continue growing and to focus on building personalized AI products for users around the world.”

In addition, Character AI’s founding team, Noam Shazeer and Daniel De Freitas, along with some members of its research team, will join Google. The company said most of its employees will remain at Character AI, while its general counsel, Dominic Perella, will become interim chief executive officer. 

“As we enter this next phase of growth, we will continue to invest in our post-training capabilities, with the flexibility to use our own or externally available LLMs. We are excited for the future of Character.AI and are committed to serving our users through innovative new products,” the company said in the blog post. 

What is Character AI?

Character AI, founded in 2022, allows people to create AI avatars of themselves or other characters. The company reached a valuation of $1 billion in March 2023 after a $150 million funding round led by Andreessen Horowitz. 

The company previously built its own models, choosing a full stack approach of pre-training, training and deployment to create AI avatars.

But it said in its blog post that “the landscape has shifted” in the past few years where more off-the-shelf, pre-trained models are readily available. By leveraging Google’s LLMs, Character AI said it could focus on post-training models and creating new products for its users. 

Indeed, earlier this week, Meta was reported to be discontinuing its celebrity AI chatbots that were widely seen as rivals to Character AI after apparently low user uptake and engagement.

Google told VentureBeat that Shazeer, a former software engineer at Google, will join the DeepMind team. 

“I am super excited to return to Google and work as part of the Google DeepMind team. I am so proud of everything we built at Character.AI over the last three years,” Shazeer said in an email to VentureBeat. “I am confident that the funds from the non-exclusive Google licensing agreement, together with the incredible Character.AI team, position Character.AI for continued success in the future.” 

Another deal in the AI space

Google and Character AI did not provide more details about the deal, nor did either company confirm whether the agreement could be considered an acquisition.

Other big tech companies have essentially bought companies through “acquihiring,” when the executive team and large swathes of a startup are hired by a big company. Sources close to the deal told VentureBeat it was not an aquisition nor an acqui-hire

For example, Microsoft hired the co-founders of AI startup Inflection which many believe is a way to avoid regulatory concerns around an acquisition.  

This is not the first time Character AI has been involved in potential takeover talks. The Information reported that Elon Musk’s AI startup xAI considered buying Character AI, though Musk later denied the report on his social network, X (formerly Twitter).