Here's how Microsoft is delivering “good results” for Inflection AI VCs, Reid Hoffman promises

Image credits: Kelly Sullivan/Getty Images on LinkedIn

How much Microsoft is paying all of Inflection AI's investors as part of its strangely structured escape deal with co-founders, much of the staff and the rights to use the technology has not been publicly disclosed. Microsoft declined to comment when asked.

But unnamed sources say the information It's spending roughly $650 million: $620 million for non-exclusive licensing fees for the technology (which means Inflection is free to license it elsewhere) and $30 million for Inflection to agree not to sue over Microsoft's poaching, which includes Co-founders Mustafa Suleiman and Karen Simonyan.

Microsoft board member Reed Hoffman, who is also a co-founder of Inflection and an investor in it, along with his company Greylock, promised, “All Inflection investors will get good results today, and I see a good, upside future ahead.” In a post on LinkedIn Earlier this week.

Investors in the $225 million Series A round will receive 1.5 times their investment; Participants in the subsequent $1.3 billion round will receive 1.1 times their investment, according to The Information. While these accounts for $650 million, these investors will also retain shares in the startup's remaining skeleton. However, the new company will move away from building a dedicated AI chatbot called Pi on a massive computer chassis featuring 22,000 of Nvidia's expensive, hard-to-find AI chips. It will now become an AI studio that helps other companies work with Big Language Model AI.

Inflection did not respond to a request for comment.

In its short life as an ambitious OpenAI competitor — founded in 2022 — Inflection has raised over $1 billion at a $4 billion valuation — from notable figures: Microsoft co-founder Bill Gates, and Microsoft itself, as well as the former CEO of Google. Eric Schmidt, Dragoneer Investment Group, Nvidia, et al.

Just to state the obvious: Microsoft offered a soft landing for Gates (who is technically no longer with the company but is still a god figure there) and its board member's venture capital firm, due to an expensive, and probably fruitless, AI project. All the big cloud vendors have already lined up other chatbot partners: Microsoft with OpenAI, Google and Amazon with Anthropic, and Cohere is picking up a variety of other companies like Oracle and Salesforce.

When Inflection mastered the Pi on its massive AI infrastructure, it seemed like the race was already lost.

Interestingly, the money Microsoft is spending to bring down this startup may be worth it. It is true that Suleiman has a somewhat ambiguous reputation as president, according to a 2021 investigation The Wall Street Journal that alleged bullying behavior. But Microsoft itself, despite becoming kinder and softer under CEO Satya Nadella, still has… Long history as a difficult workplace.

And who better than the founder and tech geniuses behind Google DeepMind, who now has experience building an MBA? The co-founders are familiar with Google's secrets as well as the next generation of artificial intelligence. For example, Simonyan helped lead AlphaZero, the AI ​​that perfected the board game Go.

Despite its close ties to OpenAI, Microsoft also has several reasons why it needs a backup for its all-important AI gambit. For one, The Federal Trade Commission said it was considering its deal with OpenAI, Plus Anthropic's deals with Amazon and Google. If some type of FTC mandate is issued, Microsoft would be wise to have options.

In addition, there are rumors that some Microsoft engineers and OpenAI engineers do not have a great love relationship, As reported by Business Insider. Then there was the Sam Altman firing saga that had Nadella telling the world that he had been absorbing Altman and a lot of OpenAI, but backed out.

There are a lot of red flags regarding OpenAI, and Microsoft would be wise to wean it off of adoption.

Then again, just like Microsoft's investment in OpenAI, we wonder if regulators also have something to say about this deal.