Spyglass - Behold: the Hackquisition

Stop me if you've heard this one before. A multi-trillion dollar Seattle-based tech company is hiring the team behind a highly capitalized AI startup whose founding team has a strong pedigree in the space. This is not an acquisition. I repeat – well, they repeat – this is not an acquisition. There is a team being left behind at the old company to focus on continuing down a certain path... And well, probably the brand new and undoubtedly insanely highly priced licensing deal from the big tech company that just poached their executives.

No, this is not about Microsoft acquiring hiring Inflection. This week, it's about Amazon acquiring hiring Adept. Here's Taylor Soper:

Amazon is amping up its AI efforts by hiring executives from Adept, a San Francisco-based startup building “agents” that automate enterprise workflows.

Adept co-founder and CEO David Luan, the former vice president of engineering at OpenAI, will join Amazon. Adept co-founders Augustus Odena, Maxwell Nye, Erich Elsen, and Kelsey Szot will also move to Amazon, along with a few other employees.

Adept will continue operating as an independent company with its remaining workforce. Amazon will use some of Adept’s technology as part of a non-exclusive license.

Two is a trend. We now clearly need a name for such shenanigans. It's not exactly an acqui-hire, because the "acqui" part has been very specifically avoided here as it would raise regulatory red flags. Might I suggest: a hackquisition? As in, a hacked acquisition. We can quibble on the details, but in a different time, with a different regulatory environment, this clearly would have been an actual acquisition made by Amazon, be it for talent, tech, or both.

Yes, if you squint, you can see the official narrative here. From Adept's blog post:

Continuing with Adept’s initial plan of building both useful general intelligence and an enterprise agent product would’ve required spending significant attention on fundraising for our foundation models, rather than bringing to life our agent vision. Therefore, to focus on maintaining the strong momentum and potential of our agent tech stack, we are announcing some updates to our strategy and the company.

Adept will now focus entirely on solutions that enable agentic AI, which will continue to be powered by a combination of our existing state-of-the-art in-house models, agentic data, web interaction software, and custom infrastructure. We look forward to continuing towards this vision and working with partners to bring agentic capabilities to their products and tools.

In addition, the Adept co-founders and some of the team are joining Amazon’s AGI organization to continue to pursue the mission of building useful general intelligence. Amazon is also licensing Adept’s agent technology, family of state-of-the-art multimodal models, and a few datasets.

And if you have a big enough wallet, as Amazon clearly does, you can buy that story – quite literally! In English, what Adept is saying is that while they started out trying to create AGI, the realities of both business and life require that businesses have an actual business model at some point. And Adept thinks they have a path there with their "agents". So the founders along with an untold number from the team are going off to Amazon to work on AGI while some other employees remain behind to build out Adept's "agentic" business. Again, the same basic narrative as Microsoft/Inflection.

This one is packaged a little better since they don't need to bring in an outside person to be the new CEO of Adept, and instead it will be the former Head of Engineering. The Head of Product is also remaining. What's not stated, but will be dug up in the coming days, is if any of these "licensing" fees are going back to the cap table. Or if any of the massive amount of cash the company raised previously is being returned. Or if there's some sort of deal where Amazon will pay out investors in Adept over time (presumably via the licensing model). Adept is now a very different company than the one investors put hundred of millions of dollars into, so presumably they would and do value it differently now. It's a different team at the top going after a subset of their former vision.

The company had raised $350M just over a year ago (or that's when it was announced, but it was probably raised around then as well, as AI deals tend to be announced soon after closing). This round reportedly valued the company at $1B. Other reports had the company talking to Meta and who else, Microsoft – also an investor in the company, naturally – about an acquisition or various other deals. Microsoft denied they would acquire Adept "in whole or in part" on the record, though that seemingly still wouldn't necessarily rule out a "hackquisition" – "we didn't acquire anything, we simply hired some members of the team" type thing. Anyway, the Fortune report had Adept getting some sort of term sheet from Microsoft. Meanwhile, The Information had an anonymous source saying that a Meta acquisition was "unlikely" but still...

It sure feels like Adept was out there selling itself, in part or in whole, and undoubtedly trying to fundraise at the same time. Again, we'll learn more in the coming days if the financial situation was dire – Inflection had also apparently been trying and failing to fundraise before they were hackquired – or if this was more about Amazon, itself seemingly in a bit of a tricky spot with AI, feeling the need to bring on talent. Perhaps a bit of both.

Regardless, regulators are going to see a continuing trend here. So the best case scenario there was that this was a "save" of both Adept, the company, and of face for the founders and investors who found themselves in a hugely valued AI company burning through cash too quickly. And that scenario points to a world where the music is indeed slowing for some of these crazy AI fundraises. Certainly those trying to "do it all" as it were, working towards AGI.

It's now a much more prudent approach to try to build actual products and businesses using AI technology. Adept's problem there may be that the "agentic" space is also already insanely crowded and they've noted they only have some customers in beta testing with their offering.

I suspect this will not be the last "hackquisition" we see...

This is Expensive Coffee

Microsoft Agreed to Pay Inflection $650 Million While Hiring Its Staff Microsoft doesn’t want its plan to hire two of Inflection AI’s co-founders and most of its 70-person staff to be seen as an acquisition... The Information Jessica E. Lessin, Natasha Mascarenhas, & Aaron Holmes Just to follow-up on

Spyglass •M.G. Siegler

What Was the Point of Inflection?

Microsoft Hires DeepMind Co-founder Mustafa Suleyman from Inflection to Run Consumer AI He’s reporting to Satya Nadella and bringing on most staff from his Inflection AI startup... Techmeme Various Headlines So many questions about this Microsoft/Inflection deal. Wait a minute, strike that. There is no deal. Well, there may

Spyglass •M.G. Siegler

“Microsoft? Never Heard of Em.”

Will the Inflection totally not a deal come back to bite Microsoft?

Spyglass •M.G. Siegler

Is AI Spend the New Streaming Spend?

Wall Street loves to reward arms race spending -- until they don’t.

Spyglass •M.G. Siegler

Did Apple Just End AI’s First Era?

AI’s performance arms race yields to the product arms race…

Spyglass •M.G. Siegler

The Overwhelming Chaos of AI is Underwhelming

The AI madness needs to settle to reach its potential -- and it will

Spyglass •M.G. Siegler

Won’t Get Fooled Again

Some decidedly unhelpful thoughts about investing in AI startups…

Spyglass •M.G. Siegler