Investors Undaunted by Spate of AI Acqui-Hires

Thomvest Ventures was finishing an early-stage investment in an artificial intelligence startup when the San Francisco–based firm’s managing director, Don Butler, noticed Thomvest’s lawyer had made a subtle change to the fine print of the deal’s term sheet.

In a section outlining what would constitute a liquidation event for the startup—typically, a sale, initial public offering or bankruptcy—the lawyer had added “an exclusive and material license of the company’s intellectual property.” The language was inspired by a recent spate of unusual arrangements in which big tech companies hired most of the talent inside AI startups and paid hefty fees to license their technologies—but not hefty enough, in some cases, for investors to view them as winning deals.