Google Gets Character.AI Co-founders In New Deal

This “agreement with Google … will allow us to accelerate our progress,” Character.AI said in a blog post.

In a deal that might remind some of Microsoft’s March hiring of Inflection CEO and DeepMind co-founder Mustafa Suleyman, Google will hire the co-founders and members of the research team for Character.AI in exchange for an undisclosed amount of funds for the artificial intelligence startup.

As part of the deal, Character.AI co-founders Noam Shazeer and Daniel De Freitas will return to Google, according to a Friday blog post by the Menlo Park, Calif.-based startup. Shazeer, Character’s CEO, and De Freitas, the startup’s president, formed the company in 2022.

“We’ve entered into an agreement with Google that will allow us to accelerate our progress,” according to the Character blog post. “As part of this agreement, Character.AI will provide Google with a non-exclusive license for its current LLM technology. This agreement will provide increased funding for Character.AI to continue growing and to focus on building personalized AI products for users around the world.”

Google Character AI Deal

CRN has reached out to Character for comment. The changes are effective immediately, according to the blog post.

In a statement shared with CRN, Shazeer said he is “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 3 years,” he said. “I am confident that the funds from the non-exclusive Google licensing agreement together with the incredible Character.AI team positions Character.AI for continued success in the future.”

In a statement to CRN, a spokesperson with Mountain View, Calif.-based Google said the cloud and AI vendor is “particularly thrilled to welcome back Noam, a preeminent researcher in machine learning, who is joining Google DeepMind's research team, along with a small number of his colleagues.” Google did not elaborate on Shazeer and De Freitas’ new roles.

Google Cloud has more than 100,000 partners worldwide, according to CRN’s 2024 Channel Chiefs.

Google’s Character Relationship

Google has been reportedly investing hundreds of millions of dollars in Character even as it invests billions into fellow AI startup Anthropic.

Character – which will retain most of its employees with the Google deal – provides chatbot services based on large language models (LLMs) that generate responses and open-ended conversations with users. The service became available in September 2022, followed by a $150 million funding round in March led by Andreessen Horowitz that valued the startup at $1 billion.

As part of the new Google deal, the cloud vendor receives a non-exclusive license for Character’s current LLM technology.

Dominic Perella, Character’s general counsel, now serves as interim CEO. Perella has been part of Character’s core leadership team since last year, according to the startup.

His resume includes about a year as senior vice president and general counsel of Branch, according to his LinkedIn account. Perella also worked at Snapchat parent Snap Inc. for about eight years, leaving in 2022 as vice president, deputy general counsel and chief compliance officer.

According to the blog post, Character is shifting to more third-party LLM adoption alongside the models it trained and fine-tuned due to the prevalence of pre-trained models in the market. “This allows us to devote even more resources to post-training and creating new product experiences for our growing user base,” according to the startup.

Character “will continue to invest in our post-training capabilities, with the flexibility to use our own or externally available LLMs,” according to the blog post.

“We are excited for the future of Character.AI, and are committed to serving our users through innovative new products,” according to the post. “We are incredibly grateful to Noam, Daniel, and team for bringing Character.AI to life. We look forward to building on top of their contributions in this next phase of growth for Character.AI.”

As for the Character co-founders, Shazeer’s Google career started in 2000 as a software engineer, according to his LinkedIn account. He left the vendor in 2021 with the title of principal software engineer.

During his time with Google, Shazeer led the team of researchers that built the Language Model for Dialogue Applications, or LaMDA, which can power conversational AI products, according to TechCrunch.

De Freitas worked at Google for about five years before co-founding Character, according to his LinkedIn account. He left Google with the title of senior staff software engineer and also worked on LamDA.

His resume also includes about four years with Microsoft, leaving in 2016 as a level two software engineer working on natural language processing and automatic open domain question answering for Bing.

Character’s recent innovations in its AI technology include the June introduction of Character Calls two-way voice conversations with an AI character, a website refresh in April and the March reveal of the Character Voice suite of AI characters speaking to users in one-on-one chats, according to the startup.

Google’s recent AI advancements include Google Photos AI editing tools, new Chrome AI features and faster response time for Gemini.

AI Startup Deal Scrutiny

In March, Microsoft hired multiple employees from startup Inflection AI – including the startup’s CEO and co-founder Suleyman, who became a Microsoft executive vice president and CEO of the newly formed Microsoft AI organization.

The startup’s $1.3 billion funding round last year included Microsoft and Microsoft co-founder Bill Gates. Suleyman sold DeepMind to Google in 2014. He left Google in 2022 to co-found Inflection.

Close partnerships between tech giants and smaller AI organizations have led to scrutiny in the U.S. and in Europe. In July, the United Kingdom’s Competition and Markets Authority (CMA) published a letter saying that it can “begin an investigation” into the Microsoft-Inflection deal.

In January, the FTC announced that Microsoft, OpenAI, Amazon, Google parent Alphabet and Anthropic needed to provide information on their recent investments and partnerships.