Here’s Substantial Tech’s playbook for taking over the AI ​​industry

A few months ago I was sitting in the audience at a technology conference in San Francisco watching BloombergEmily Chang’s interview with Reid Hoffman.

She asked about Microsoft’s hiring of the team behind Inflection, a potential OpenAI competitor that Hoffman co-founded. It was an acquisition in every respect but name, clearly designed to avoid antitrust scrutiny. Microsoft (where Hoffman is a board member) not only hired most of Inflection’s employees — it also licensed the startup’s technology in a way that seemed designed to make your investors fully.

Speaking to Chang on stage that day, Hoffman predicted that what happened with Inflection would become a “pattern” for future AI deals. We’re seeing that pattern play out now.

Last Friday, Amazon announced it was hiring most of the team behind Adept, another potential OpenAI competitor that has raised about $400 million from top investors to build what it claims is a words of CEO David Luan“a new type of giant model that turns natural language into actions on your machine.”

Amazon said Share‘S Taylor Soper that it employs 80 percent of Adept’s employees, including Luan and his co-founders. In an internal memo published by the outlet, senior vice president Rohit Prasad said that, like Microsoft did with Inflection, Amazon would also license Adept’s technology to “accelerate our roadmap to build digital agents that can automate software workflows.”

Adept corporate blog post on the news suggests that money is running out: “Continuing with Adept’s original plan to create both a useful general intelligence and an enterprise agent product would require devoting significant attention to fundraising for our foundation models rather than realizing our agent vision.” Recent reports say that the company he was looking for sell out.

The truth is that building leading-edge AI models is incredibly pricey, and raising $400 million isn’t enough to compete in today’s climate. Meanwhile, Substantial Tech has a ton of cash and is eager to get in on what everyone thinks is the next huge thing. It makes sense that more AI startups will go the way of Inflection and Adept as the industry consolidates.

The problem for Substantial Tech is that they can no longer buy companies like they used to. The current antitrust enforcement system would certainly try to block Amazon’s acquisition of Adept, whether there was a powerful legal case for doing so or not. (Amazon executives are still fuming over not being allowed to buy a robot vacuum company.)

Still, capitalism finds a way. What Microsoft did to Inflection and Amazon just did to Adept is the fresh Substantial Tech playbook for swallowing the AI ​​industry and getting away with it. Silicon Valley has a affluent history of acquisitions where a startup is gutted of its people and left for dead. Microsoft and Amazon have done something that is essentially a reverse acquisition, where the hiring of people and the corresponding licensing agreement are used to hide what is really an acquisition.

Meanwhile, Reid Hoffman should be congratulated not only for his true prediction about the future of these deals – one of Adept’s early investors was none other than his venture capital firm, Greylock.