Hugging Face recently acquired Spanish-based startup Argilla for $10 million. With this acquisition of a collaboration platform for AI engineers and experts, the company has closed four acquisitions.
“The volume of acquisition opportunities really skyrocketed in the past few months. We are receiving over ten acquisition opportunities a week these days,” said Hugging Face CEO Clem Delangue, in an interview with Bloomberg.
It’s not just them, but a number of big companies are being bombarded with acquisition requests from startups, ringing in the question of whether all AI startups will eventually face the indispensable fate of acquisition?
Spike in Acquisition Requests
“We’re always interested in interesting acquisitions,” said co-founder and CEO of Databricks Ali Ghodsi, in the backdrop of the recently concluded Data + AI Summit.
Considering themselves to be ‘really picky’, Ghodsi said that they invest a lot of time on acquisitions every week.
“We’re just looking at what’s strategic for us at any given time. If there’s really good synergy, we will do it,” said Ghodsi, commenting on an ongoing joke that Databricks will have to announce a big billion-dollar acquisition for its Data + AI Summit every year.
Databricks chief also clarified his acquisition strategy with ‘people’ being the prime focus. “We start with the people. Are they going to work out culturally at Databricks? Is that going to be a match? There’s no point in acquiring a company, and the employees hating each other. Then it’s just a matter of time before they leave. So that’s really important for us,” he said.
Ghodsi considers product experience for users, and financials as other important factors for any acquisition.
The Viable Option
Given the large compute requirements and the need for access to a huge customer base, emerging AI startups may best survive under the umbrella of an existing thriving company.
“Companies like Hugging Face and others are becoming sort of magnets because of the visibility, talent and compute that we have,” said Delangue, who also mentioned how startup founders are reaching out to him via emails and even social media with acquisition pitches.
Startups with great teams and good traction might not receive the level of VC funding required. In such cases, acquisition opportunities may be a viable option.
Interestingly, big tech companies that have the money to invest heavily, can continue to pour funds into AI developments. Meta chief Mark Zuckerberg had recently said that they are investing “to stay at the leading edge,” and that they are also “scaling the product before it is making money”.
However, this lee-way is not available to all emerging startups. The recent example of Stability AI, where the founder left the company, showed the world how a promising AI startup that failed to receive adequate fundings last year started facing problems.
Preparing for the Wave
Delangue spoke about how companies are investing in hot topics such as LLMs and referenced Mistral’s recent funding. However, Hugging Face is placing its bets on startups working on less hyped topics such as datasets. “Argilla, working on datasets, on data, in my opinion, is now becoming the bottleneck or the most important.”
While Hugging Face’s recent acquisition route is investing in the outliers, big-tech companies’ acquisition style has been pretty straight-forward. If not acquisition, big-tech companies pump hefty amounts into companies making massive progress.
Microsoft recently made a $650 million deal to use Inflection’s models and even hired the startups’s top talent, including Mustafa Suleyman, to lead their AI division.
Likewise, Apple recently acquired a Canadian-based computer vision company Darwin AI to further their AI venture, with the company acquiring 32 AI startups in 2023.
As per a recent report by AIM Research, Indian AI startups alone have raised a funding of $560 million across 25 funding rounds. Going by the influx of acquisition requests big techs are receiving, it seems almost clear that all AI startups will be eventually acquired. All eyes on OpenAI!
