2024Technology / AI

Google ← Character.AI

Google Pays $2.7B to Rehire the Inventors of Transformer Architecture

A reverse acqui-hire that brought back Noam Shazeer, co-author of "Attention Is All You Need," to lead Google's Gemini project

Deal Value

$2.7B

Team Size

Founders + key employees

Industry

Technology / AI

In August 2024, Google signed a $2.7 billion deal with Character.AI to license the startup's technology and hire its co-founders Noam Shazeer and Daniel De Freitas—both former Google researchers who had left in 2021. The deal brought back one of the inventors of the transformer architecture that powers modern AI to lead Google's Gemini project.

Background

In 2017, Noam Shazeer was one of the lead authors of "Attention Is All You Need," the seminal paper that introduced the transformer architecture—the foundation of ChatGPT, Gemini, and virtually all modern AI.

Shazeer first joined Google in 2000, just two years after its founding. He spent 20 years at the company before leaving.

At Google, Shazeer and Daniel De Freitas built a chatbot named Meena. When Google refused to release it publicly, they left in 2021 to found Character.AI.

Character.AI became a popular platform allowing users to chat with AI-powered versions of celebrities and fictional characters, reaching millions of users.

The Move

In August 2024, Google confirmed a $2.7 billion cash deal to license Character.AI's technology and hire Shazeer, De Freitas, and other key employees.

Shazeer was appointed as technical lead on Gemini, alongside Jeff Dean and Oriol Vinyals—putting him at the center of Google's AI efforts.

The deal was structured as a "reverse acqui-hire"—licensing plus hiring rather than a full acquisition—to avoid regulatory concerns.

Shazeer, who owned 30-40% of Character.AI, reportedly netted $750 million to $1 billion from the deal personally.

Key Players

Noam Shazeer

Character.AI Co-founder → Google Technical Lead on Gemini

Co-author of "Attention Is All You Need." One of the inventors of transformer architecture. 20-year Google veteran who returned for $2.7B.

Daniel De Freitas

Character.AI Co-founder → Google

Former Google researcher who built Meena chatbot with Shazeer before leaving to found Character.AI.

Why It Worked

•Google was rehiring someone who had literally invented core AI technology, eliminating integration risk.
•Shazeer knew Google's systems and culture from 20 years of experience—he could be productive immediately.
•The reverse acqui-hire structure avoided regulatory scrutiny that a full acquisition would trigger.
•Character.AI got significant value for shareholders while the founders returned to a well-resourced environment.

Challenges

•The U.S. Department of Justice is investigating whether this deal circumvented regulatory oversight.
•Character.AI had to continue operating with reduced leadership and resources.
•Questions about whether paying this much for rehires sets unsustainable talent market expectations.

Outcome

•Google gained one of the world's foremost AI researchers to lead its most important AI project.
•Shazeer immediately became technical lead on Gemini, Google's answer to ChatGPT.
•The deal demonstrated that former employees can become billion-dollar assets.
•Character.AI continued operating independently with Google's licensing investment.

Lessons for Other Liftouts

1.Former employees who left to build competitors can become the most valuable acquisition targets.
2.Inventors of foundational technology command extraordinary premiums in talent markets.
3.Reverse acqui-hires can be used to bring back talent that wouldn't consider traditional employment.
4.The cost of letting key talent leave can be measured in billions.