VCs’ Latest Foe in Race for AI Startup Deals: Buyout Offers

Venture capital investors face stiff competition in artificial intelligence startup deals from Google and Nvidia, which are increasingly winning stakes in the startups by offering founders price breaks on cloud computing or chips. But VC investors face competition from another quarter: corporations that are willing to pay top dollar to buy startups outright.

Two recent AI acquisitions demonstrate the issue. Venture firm Menlo Ventures in May offered to invest in Casetext, a startup that provides AI tools and other services for law firms, at a valuation of $400 million before the new capital. But the startup decided instead to sell to media and data company Thomson Reuters for $650 million in a cash deal announced in late June. The venture offer has not previously been reported.