Update: This article has been updated to reflect that ServiceNow said it is no longer negotiating with Decagon.
Buzzing AI agency startup Decagon may be the latest company to be swept up in the growing wave of AI deals.
The company was last valued at $4.5 billion earlier this year and has hired a bank to gauge acquisition interest, people familiar with the matter said.
Decagon had early discussions with cloud software giant ServiceNow, but a ServiceNow spokesperson said they were not proceeding. People familiar with the matter told Business Insider they are also in early talks with other companies. If the deal doesn’t materialize, Decagon may raise a new round of funding.
“Our approach to M&A has not changed: We remain an organic growth company first and foremost,” said Amit Zavery, President, Chief Product Officer and Chief Operating Officer of ServiceNow. “M&A is a vehicle to accelerate our roadmap or unlock meaningful new innovation.”
The interest in Decagon represents a new turn in the artificial intelligence craze: After years of huge venture capital investments and soaring valuations, technology companies are increasingly looking to enter the promising artificial intelligence market through acquisitions. Hugging Face was recently acquired by Nvidia for $12.9 billion, and OpenRouter was acquired by Stripe for approximately $8 billion.
Growing AI-related companies often receive offers at significant premiums to their last valuations, so if Decagon accepts the offer, its valuation could be significantly higher than its previous valuation of $4.5 billion.
Founded in July 2023 by Jesse Zhang and Ashwin Sreenivas, Decagon leverages generative AI automation Provide customer support to enterprise customersincluding Delta Air Lines, Snapchat and Ticketmaster. The company has raised more than $400 million in funding from prominent Silicon Valley investors including Andreessen Horowitz, Index Ventures, Bain Capital Ventures and Accel. It competes with industry veteran Bret Taylor’s Sierra, which was valued at $15.8 billion earlier this year.
ServiceNow’s previous interest in Decagon was to reassure investors that it could adapt to the threat of artificial intelligence to traditional software businesses. The company’s stock price plummeted earlier this year during the so-called SaaS apocalypse, when investors worried that artificial intelligence could eat into software companies’ profit margins.
It was also punished for its $7 billion acquisition of security business Armis, announced late last year. The stock has rebounded 55% in the past six months as ServiceNow continues to invest heavily in artificial intelligence and reinvent parts of its business.