Google Says Over Half of Generative AI Startups Use Its Cloud

Google Cloud's general manager for startups and AI, James Lee, said the company is becoming the "preferred choice" for generative AI startups due to its flexibility in offering AI models from various companies.

Google Cloud customers have the option to use AI models from Google itself as well as other companies, a degree of flexibility that appeals to startups, Lee said. (REUTERS)

When employees leave Google to join the artificial intelligence startup race, the search giant still has a way to benefit — by keeping those former workers as cloud customers.

More than half of venture-backed generative AI startups pay for Google's cloud computing platform, Alphabet Inc., Google's parent company, said Tuesday. Of the startups valued at over $1 billion, 70% are Google Cloud customers, and about a third of those are helmed by former employees, including Anthropic, Character.ai and Cohere, the company said. That gives Google a way to extend its influence in the field even when it sheds talent.

Google's cloud unit, which reported a profit for the first time this year, has emerged as one of the company's best bets for growth as its core search business matures. Google still trails Amazon.com Inc.'s AWS and Microsoft Corp. 's Azure in the market. But startups in the field of generative AI — programs that can spin up images, text and video from simple prompts — are increasingly turning to the company, said James Lee, Google Cloud's general manager for startups and AI.

“We're seeing strong momentum in our business, and we see Google Cloud as the preferred choice for startups building generative AI,” Lee said in an interview.

Google Cloud customers have the option to use AI models from Google itself as well as other companies, a degree of flexibility that appeals to startups, Lee said.

Alphabet Chief Executive Officer Sundar Pichai said earlier this year that by his count, more than 2,000 startups have been created by former employees, some of which become customers or eventually boomerang back to Google. “I think it's a healthy part of how the ecosystem works,” he said.

Elemental Cognition CEO David Ferrucci says Google has also been in the AI space for so long, he trusts that the team will “talk a common language” when discussing his company's needs, he said. Elemental uses Google Cloud exclusively.

Google determined the proportion of startups using its platform by cross-referencing its list of cloud computing clients with research firm PitchBook's list of generative AI startups that have raised money from venture capital firms, accelerators, individual investors and other sources, a company spokesperson said. Google excluded customers that did not meet a minimum level of spending, though cloud computing credits that the company doles out to startups counted toward that threshold, the spokesperson said. Some of the startups use other cloud providers as well, Lee said.