In the rapidly changing technology industry, the fate of startups is often filled with uncertainty. According to The Information, Character.AI, an American AI startup, conducted a layoff of at least 5% of its employees on August 29th, shortly after reaching a major deal with Google. The layoffs primarily affected marketing and recruiting positions, and before the layoff, Character.AI had approximately 120 employees.

In response to the layoffs, Character.AI stated, "We are readjusting the direction of the company to ensure that all positions align with our new strategy of developing personalized AI products. Therefore, we have made slight adjustments to the number of employees. This is a difficult decision, but we believe it will contribute to achieving the company's growth goals, enhancing focus, and better positioning the company as a leader in the To C AI field."

Character.AI claims to have reached 20 million monthly active users. Last year, the company raised $150 million in funding, with a valuation of $1 billion.

Founders join Google

In fact, this layoff event is not isolated. Earlier reports this month indicated that Google spent billions of dollars to acquire Character.AI co-founders Norm Shazell and Daniel DeFretas, as well as about 30 developers, and entered into a licensing agreement with Character.AI. At the same time, Google will acquire Character.AI investors' stocks at a valuation of $2.5 billion.

$Alphabet-C (GOOG.US)$ The reason for being willing to pay such a high price is closely related to their anxiety in the AI competition. Google has always been resentful of not leading in the field of AI. This deal not only allowed Google to gain access to Character.AI's advanced technology, but also put them in the spotlight of the investigation by the Federal Trade Commission for anti-trust regulation in the US.

In fact, this is almost like Google mocking antitrust regulators, because similar trades like$Microsoft (MSFT.US)$OpenAI,$Amazon (AMZN.US)$Adept, etc. have already been scrutinized by regulatory agencies. This month, a US judge ruled that Google's search engine violated antitrust laws.

On August 22nd, Google appointed Nom Sahagian, co-founder and former CEO of Character.AI, as co-head of Gemini. Sahagian will lead Google's flagship AI project together with the existing co-heads of Gemini, Jeff Dean and Oriol Vinyals.

Sahagian is the core author of Transformer. He first joined Google in 2000, when Google had just been established for two years. In 2021, Sahagian left Google and co-founded Character.AI with Daniel De Freitas, and now he has returned to Google with his team and research achievements.

Sahagian responded, "We are thrilled to join the world's best team and build the most valuable technology in the world. I believe that the funding from Google's licensing agreement and Character.AI's proud team will enable Character.AI to continue its success in the future."

Transition to late-stage training.

Currently, Character.AI will be temporarily led by their general counsel, Dom Perella. The remaining leadership of Character.AI must convince around 100 regular employees to continue following the new leadership and new tasks, despite their former CEO and many colleagues who joined Google becoming wealthy. Only then can Character.AI have hope of obtaining new venture capital.

Character.AI has long talked about its closed-loop strategy, which involves training its large models, using those models for chatbots, and then using user data for further training.

Now, Character.AI will start using open-source models developed by other companies and transition to late-stage training.

Editor/Rocky