Amazon hires Covariant founders, inks licensing deal with AI startup in latest ‘reverse acquihire’
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Amazon is hiring three of the founders fromCovariant, a Bay Area startup that develops AI for advanced warehouse robotics systems.
As part of the arrangement, announced late Friday just before the holiday weekend, Amazon will receive a non-exclusive license to Covariant’s AI models.
Covariant will continue to operate, but the three co-founders — former OpenAI researchers Peter Chen, Pieter Abbeel, and Rocky Duan — and about a quarter of the company’s employees are expected to join Amazon.
The deal is similar to one that Amazon struck in June when it hired the founders of Adept, a well-funded startup building AI agents that automate enterprise workflows. Amazon also reached a licensing deal with Adept, and about a third of Adept’s employees joined Amazon at the time.
Other tech giants are following a similar playbook to bring AI heavyweights into the fold. For example, Microsoft earlier this year hiredMustafa Suleyman, co-founder and former CEO of consumer chatbot startup Inflection AI, along with Inflection co-founder Karén Simonyan and other employees.
These deals are essentially “reverse acquihires,” said Alex Heath, deputy editor at The Verge, in a post in July, describing the combination of hiring and licensing as acquisitions in disguise.
Acquisitions or not, regulators have been paying closer attention to these deals between tech giants and smaller startups. Amazon has reportedly drawn questions from the U.S. Federal Trade Commission related to the Adept deal.
Emeryville, Calif.-based Covariant, founded in 2017, focuses on AI-powered robotics systems, which are based on a platform that it calls the “Covariant Brain.” The company’s technology automates warehouse tasks including order picking and sortation, item induction, and depalletization.
Covariant’s current COO, Ted Stinson, will become CEO of the company. Another Covariant co-founder, Tianhao Zhang, will lead the company along with Stinson, according to a Covariant blog post.
In its marketing materials, Covariant uses one of Amazon’s signature phrases to tout the immediacy of its impact, saying its AI platform delivers value on “Day One.”
Covariant’s customers include healthcare supply manufacturer McKesson, German retail giant Otto Group, and Radial, an e-commerce fulfillment solution company.
Robots powered by Covariant’s AI systems sort health and beauty items for an unnamed major retailer, at a facility operated by e-commerce fulfillment solution company Radial, one of Covariant’s customers. (Covariant Video)
Bloomberg News reported in July that Covariant had received “takeover interest” from Amazon, noting that its technology could help Amazon centralize its fulfillment center automation robots through one platform.
Amazon’s move into warehouse robotics started with its acquisition of Kiva Systems about 11 years ago. In subsequent years, the company has rolled out a series of warehouse robots of its own across its operations, seeking to automate the process of moving products and packages through its fulfillment and sortation centers.
In the process, the company has faced increased scrutiny over worker safety as it automates its warehouses and pushes for faster deliveries.
A widely cited 2019 report by the Center for Investigative Journalism showed a higher injury rate at Amazon’s robotic fulfillment centers than at its older facilities at the time, indicating that human workers were struggling to keep up.
Amazon has disputed the notion that robots boost injury rates. Recordable incident rates and lost-time incident rates were 15% and 18% lower, respectively, at Amazon Robotics sites than they were at its non-robotics sites in 2022, according to numbers released by the company last year.
“I want to eliminate the mundane, and the tedious, and the repetitive,” said Ty Brady, the chief technologist for Amazon Robotics, in a 2023 interview with GeekWire. “I want to make things safer inside our fulfillment centers. I don’t want folks to have to lift heavy boxes and crouch down on their knees or reach over their shoulders. And if we can have robotic systems to do that, that’s a win for everybody.”
Covariant has raised $222 million, including $75 million in a Series C round in April 2023, led by Radical Ventures and Index Ventures, and joined by Canada Pension Plan Investment Board, Amplify Partners, Gates Frontier Holdings, AIX Ventures, and Northgate Capital. The round reportedly valued Covariant at $625 million.
The company has more than 160 employees, according to LinkedIn. Amazon said about 25% of the Covariant workforce is joining its Fulfillment Technologies & Robotics team.
“Covariant’s models will help drive new ways to generalize how our robotic systems learn and provide dynamic opportunities for how we use automation to make our operations safer and better deliver for customers,” Amazon said in a blog post. Amazon noted that will expand its AI and robotics team in the Bay Area as part of the effort.
Financial terms of Amazon’s AI licensing deal with Covariant were not disclosed.
Goldman Sachs (GS.N), opens new tab is planning to cut a few hundred jobs as part of an annual review process aimed at low performers, a person familiar with the matter told Reuters on Friday.
The investment bank reinstated performance-related job cuts in 2022 after halting it for two years due to the COVID-19 pandemic.
"Our annual talent reviews are normal, standard and customary, but otherwise unremarkable," a Goldman spokesperson said in a statement to Reuters. "We expect to have more people working at Goldman Sachs in 2024 than 2023."
Last year, the exercise reportedly resulted in 1% to 5% of Goldman employees losing their jobs. Over the years, the cuts done under Goldman's strategic resource assessment have fluctuated based on market conditions and its financial outlook.
The bank's global workforce stood at 44,300, as of the quarter ended June 30. It took on multiple rounds of workforce reductions in 2023 as dealmaking suffered and higher-for-longer interest rates weighed on the macroeconomic outlook.
The operating environment for banks has since improved with Goldman reporting second-quarter profit that more than doubled in July on strong debt underwriting and fixed-income trading.
The resilience of the U.S. economy has given corporate executives the confidence to pursue deals, debt sales, and stock offerings. But despite an industry-wide recovery, dealmaking activity has remained below historical averages.
Goldman shares turned positive in afternoon trading and closed 0.6% higher. The stock has surged 32% this year and has outperformed the broader markets, as well as an index tracking rival large-cap banks (.SPXBK), opens new tab.
Earlier in the day, a Wall Street Journal report said, opens new tab the layoffs that have already begun will continue through the fall and may impact more than 1300 employees, or 3% to 4% of its workforce.
Goldman, however, said in its statement to Reuters that the numbers reported by the Journal were not accurate.
For workers starting out, getting a job with a Russell 1000 (.RUI), opening a new tab company is one way to get ahead. Financially speaking it also helps if that job is with Best Buy (BBY.N), opens new tab in a smaller metro area.
That's according to a recent study, opens new tab by Revelio Labs, opens a new tab, which tracks workforce data for companies, investors, and academics, and by Just Capital. The reviewers looked at how the pay of these companies matched up with living costs across the U.S, with an extra focus on low-wage workers.
Using data from the Massachusetts Institute of Technology, opens new tab, the study found software engineers for instance make 137% more than the average local living wage for a single worker with no children. Of course, it's no surprise that employees in fancy roles can earn well above local living wages.
The study also looked at entry-level retail sales roles broken down by metro area for that same group of Russell 1000 companies. These sorts of jobs are an important first step on the corporate ladder for many workers.
Best Buy stood out, with its average entry-level retail salary being 41% higher than local living wages around its stores. The latest proxy filings told a similar story, with the median Best Buy employee earning $32,656, compared with $27,642 at Walmart (WMT.N), opening a new tab and $26,696 at Target. (TGT.N), opens new tab
Why so much? The company declined to comment. However several experts I spoke with said the higher pay would reflect how Best Buy needs its workers to become experts in pricey consumer electronics, higher-skilled roles than other retailers.
"I'm probably a lot more interested in the product specifications and features for a $1,000 UHD television, for instance, than I would be for children's clothing or sports equipment, all of which are (generally) more self explanatory anyway," said Morningstar analyst Sean Dunlop, who follows the company.
He cautioned Best Buy still must balance its pay in an industry where many sales have moved online. If median total compensation for its roughly 85,000 employees went up 5% that would raise costs $140 million or 11% of 2024 net income, he said.
Revelio Labs economist Zanele Munyikwa said those developments were reasons the five metro areas where entry-level retail sales jobs at Russell 1000 companies paid the most relative to local living wages were all in California.
They included Merced, El Centro, and Visalia-Porterville, all inland cities away from the big state's coastline and some of its most expensive real estate, opens new tab. "California is expensive, but not all of it is equally expensive," Munyikwa said.
Reuters Graphics
For a reality check, I spoke with Erick Serrato, executive director of the Merced County Workforce Development Board. He said the area doesn't have a lot of the kind of entry-level retail jobs with Russell 1000 companies flagged in the study.
