AI Startup Collapses Due to "Reverse Takeover"

There will be more such examples in the future.

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Editor's note: Large technology companies are poaching top talents and intellectual property from popular artificial intelligence startups, causing these companies to fall apart. This article is from a compilation, hoping to inspire you.

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When large enterprises acquire startups, it is not uncommon for them to value their talents more than their products. This strategy, known as "acqui - hire", allows big companies to directly acquire talents bypassing the traditional recruitment process.

However, as the battle for AI talents intensifies, tech giants such as Meta, Google, and Microsoft have started implementing "reverse acqui - hire" in AI startups - that is, snatching star talents and obtaining technology licenses while leaving the rest of the employees behind. Tech giants can both gain talents and avoid government approvals and anti - monopoly reviews that may be faced in direct company acquisitions. The remaining employees struggle to survive in the shell of the remaining company. According to Bloomberg, six such incidents have occurred since last March. As the battle for AI talents continues, the number of such cases is expected to further increase.

6. Google DeepMind and Windsurf

In July 2025, Google's DeepMind division recruited Varun Mohan, the CEO of Windsurf, co - founder Douglas Chen, and core members of its R & D team. This $2.4 billion deal also included Windsurf's core technology. Google did not hold equity or gain control of the startup.

Previously, Windsurf had reached a $3 billion acquisition agreement with OpenAI, but the deal ultimately fell through. The Windsurf employees who were not recruited by Google went from looking forward to joining OpenAI to being forced to stay in a company without leadership.

Surprisingly, Windsurf was quickly acquired by AI programming startup Cognition. However, the story did not have a happy ending. According to TechCrunch, Cognition then laid off 30 members of the Windsurf team and offered a buy - out plan to the remaining 200 employees.

5. META and Scale AI

In June this year, Meta reached a final agreement with data annotation company Scale AI. Meta acquired the company's core engineer team (including founder Alexander Wang) for $15 billion and held a 49% stake. A Meta spokesperson said, "As part of the cooperation, we will deepen our work on jointly producing data for AI models. Alexander Wang will join Meta to participate in the super - intelligence project."

One month later, Scale laid off 14% of its employees. Interim CEO Jason Droege said the company will focus on government and enterprise business in the future.

4. Google and Character.AI

In August 2024, Google reached an agreement with chatbot startup Character.AI, spending $2.7 billion to acquire the company and hire its founders Noam Shazeer and Daniel de Freitas. Character.AI stated at the time, "We are delighted to announce an agreement with Google, which will accelerate the company's technological development." The statement also indicated that the startup would grant the tech giant a non - exclusive license to its large - language model technology.

After the reverse acquisition, Character.AI has shifted to a more cost - effective business model, no longer training large - language models and instead focusing on developing AI characters. Interim CEO Dominic Pereira told Bloomberg, "We are in a more favorable position than some of our peers," and pointed out that Character.AI performed well in the reverse acquisition.

3. Amazon and Covariant

In August 2024, Amazon hired three founders (Peter Chen, Peter Abbeel, and Ricky Duan) of robotics company Covariant and about a quarter of its employees, and also obtained a non - exclusive license to the company's robotic base model. According to relevant sources, Amazon paid $380 million, far exceeding the $119.5 million threshold for reporting to the Federal Trade Commission.

The Washington Post quoted relevant documents as saying that Covariant's current CEO Ted Stinson said that if Amazon directly acquired the company, the deal would be rejected by anti - monopoly authorities. Relevant sources pointed out that the reverse acquisition severely restricted Covariant's capabilities, and after the deal, Covariant was expected to only be able to operate for one year.

2. Amazon and Adept

Similarly, in June 2024, Amazon acquired AI startup Adept, hiring its CEO David Luan and most of the company's 100 - person team, and also obtaining the company's technology license. Adept, which had raised $400 million at the time, was working on developing an AI agent to perform software tasks, and this acquisition occurred before the company launched its product.

After the deal, a blog post on Adept seemed to imply that the company was short of funds and needed to shift to a more cost - effective business model. "If we continued with Adept's original plan, that is, to develop both practical general intelligence and enterprise - level agent products simultaneously, we would have to invest a lot of effort in fundraising..." the post pointed out. "Adept will fully focus on solutions to empower intelligent agents, which will continue to integrate our existing cutting - edge in - house models, intelligent agent data, web - interaction software, and customized infrastructure."

In December 2024, Amazon announced the establishment of a new lab led by David Luan, dedicated to developing AI intelligent agents that can "handle complex workflows".

After Amazon's acquisition, Adept had only about 20 employees left. Bloomberg pointed out that currently only four people list Adept as their employer on LinkedIn.

1. Microsoft and Inflection

Microsoft started the trend of reverse acquisitions last March, acquiring chatbot startup Inflection for about $653 million, which essentially "emptied" the startup. The deal included hiring founders Mustafa Suleyman and Karen Simonyan and most of Inflection's employees. About $620 million was used to obtain a non - exclusive license to Inflection's AI model, and $33 million was used to pay for legal claims arising from Inflection's employee layoffs.

Inflection had raised $1.3 billion in June 2023. However, Bloomberg pointed out that given the scale of its competitors, CEO Suleyman was worried about whether the company could raise enough funds to sustain its operations.

The deal triggered an investigation by the US Federal Trade Commission to determine whether it aimed to allow Microsoft to control Inflection while avoiding anti - monopoly reviews. Inflection is still in operation but has changed its direction from developing new AI models to the enterprise - level AI field.

Sean White, a former Mozilla executive, became the new CEO. White told Bloomberg that Inflection is still in the reconstruction phase: "Over time, the planks on this ship are being replaced one by one, but it's still the same ship."

Translator: Teresa