Big Tech 'Acquihiring' Is an Ugly but Useful Trend

If you're a venture capitalist, you dream of backing the next billion-dollar startup to one day feast on the returns of a sale.

- PARMY OLSON

The buyer? A gargantuan tech company, of course. But these days, Big Tech isn't buying so much as "acquihiring" the most promising artificial intelligence (AI) firms, specialized deals that scoop up the industry's hottest talent while avoiding antitrust scrutiny, often by leaving behind business operations, aka the husk of a company.

The phenomenon has been great for tech giants who can remove potential rivals more cheaply, but it's left venture capital investors in a rut with fewer returns than they would have expected from a traditional sale or even an initial public offering (IPO). How they react could set the whole industry on a different path and, if we're lucky, a better one.

One reaction to the trend has been to grumble. "I dislike this phenomenon," says Ali Ojjeh, chairman of Northgate Capital, a venture capital firm with $5 billion of committed capital. Mr. Ojjeh was an early personal investor in Inflection AI, whose 70-strong team was acquihired by Microsoft last year. Inflection promised its investors would be made whole, and they were, but with modest returns. Much the same happened with Scale AI, when Meta Platforms bought a 49 percent stake in the firm for $14.3 billion and hired its chief executive officer, Alexandr Wang, to head Mark Zuckerberg's new Superintelligence Labs division.