NVIDIA's acquisition agreement with Groq on Christmas Eve gave the AI chip startup's investors and employees a jubilant holiday season—the deal valued Groq at a staggering $20 billion, delivering substantial returns for all relevant parties.
However, the outlook is not always so optimistic in these types of "technology licensing + talent acquisition" deals. The typical model for such transactions is that the acquirer buys out the startup's core technology and absorbs most of its employees, leaving behind only a shell company and a handful of remaining staff. Yet, according to a report by the American tech news site Axios, in this particular deal, NVIDIA not only secured a license to Groq's technology but will also take on 90% of its employees, with nearly all involved personnel receiving high returns, corresponding to a valuation three times that of Groq's most recent $6.9 billion valuation.
Faced with situations where the terms are far less favorable than this transaction, venture capitalists are increasingly consulting lawyers to seek ways to protect their own interests. Samir Bakhru, a partner at the law firm Orrick, noted that investors have recently proposed amending the corporate charters of the companies they invest in to mitigate the risks associated with these "acqui-hire" style mergers and acquisitions.
Bakhru pointed out: "This approach can safeguard the economic interests of investors, preventing all initiative in high-profile acqui-hire M&A deals from being tightly controlled solely by the founders or the core technical team."
Currently, large tech companies are poaching core talent from startups with staggering high salary offers, leading to continuously escalating risks. Many investors had previously injected substantial capital into a cohort of emerging, research-oriented AI startups, and given that the leaders of these companies are often researchers who left top-tier labs, their concerns are well-founded.
Bakhru recommended that to prevent core talent from being poached, companies need to "include non-solicitation clauses in agreements with employees and founders; simultaneously, in regions where non-compete clauses are permissible, consider incorporating relevant terms."
Furthermore, the "shell company" left behind after a transaction's completion has also become a focus of attention for various parties. Groq's remaining business includes its inference computing platform, GroqCloud, and investors who still hold shares in this part of the business may soon achieve a smooth exit. According to informed sources, several potential buyers have already expressed interest in bidding for the GroqCloud business.
Other "leftover companies" that have undergone similar transactions are either continuing operations or seeking transformations. For instance, after Microsoft absorbed most of Inflection's employees and bought out its intellectual property, the company explicitly stated it would pivot to providing AI model training and fine-tuning services for other enterprises. Separately, two other sources revealed that after Google poached its co-founders and secured a technology license, Character.AI, while still operating its AI chatbot product, is actively seeking potential buyers.
However, Adept AI and Covariant, companies whose founders and core talent collectively moved to Amazon in 2024, have published almost no business updates on their official websites since the related transactions were announced.
In these unconventional AI sector deals by large tech companies, there is another group whose interests are affected: investment bankers—once again finding themselves excluded from the deal-making circle. This year, only two boutique investment banks successfully participated in such transactions: one was Centerview Partners, which served Scale AI, and the other was Qatalyst Partners, which facilitated the Groq deal.
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