Decagon Hires Banker as AI Agent Startup Weighs Acquisition Offers

Decagon Hires Banker to Weigh Acquisition Interest

AI agent startup Decagon has hired a bank to evaluate acquisition interest, according to people familiar with the matter. The company, which builds generative AI tools that automate customer support for enterprise clients, held early discussions with cloud software giant ServiceNow, though those talks are no longer ongoing. People familiar with the matter said there have also been early conversations with other companies. If a deal does not materialize, Decagon could instead raise a new funding round.

ServiceNow Confirms Talks Are Over

ServiceNow said it is no longer in discussions with Decagon. "Our approach to M&A has not changed: we remain an organic growth company first. M&A is a tool to accelerate our roadmap or open meaningful new innovation," said Amit Zavery, president, chief product officer, and chief operating officer of ServiceNow. ServiceNow's interest in Decagon came as the company looked to reassure investors that it can adapt to AI's threat to traditional software businesses. Its shares tumbled earlier this year during the so-called SaaS-pocalypse, when investors feared AI could erode software companies' profit margins. The stock has since rebounded by 55% in the past six months as ServiceNow continues to invest heavily in AI and reshape parts of its business. The company was also punished for making a $7 billion acquisition of the security business Armis, a deal announced late last year.

A Broader Wave of AI Dealmaking

The interest in Decagon represents a new shift in the AI boom. After years of huge venture rounds and soaring valuations, tech companies are increasingly looking to buy their way into promising AI markets. Hugging Face was recently acquired by Nvidia for $12.9 billion, and OpenRouter was snapped up by Stripe for around $8 billion. Growing AI-related businesses are often getting offers at a significant premium to their last valuation, so if Decagon were to accept an offer, it could be considerably higher than its previous $4.5 billion value.

Company Background

Decagon was founded in July 2023 by Jesse Zhang and Ashwin Sreenivas. The company uses generative AI to automate customer support for enterprise customers including Delta, Snapchat, and Ticketmaster. It has raised over $400 million from investors including Andreessen Horowitz, Index Ventures, Bain Capital Ventures, and Accel. Decagon competes with industry veteran Bret Taylor's Sierra, which was valued at $15.8 billion earlier this year.

Sources: Business Insider · Techmeme