How Microsoft is delivering “good results” for Inflection AI Ventures, as Reid Hoffman promises

Exactly how much Microsoft paid all of Inflection AI’s investors as part of its bizarrely structured deal with its co-founders, most of its employees and the rights to use the technology has not been publicly revealed. Microsoft declined to comment when asked.

But unnamed sources told The Information that the company has invested about $650 million: $620 million in non-exclusive licensing fees for the technology (meaning Inflection can license the technology elsewhere for free), and $30 million in Used to get Inflection to agree not to sue Microsoft for poaching. Including co-founders Mustafa Suleyman and Karén Simonyan.

Microsoft board member Reid Hoffman, who is also a co-founder and investor in Inflection, and his venture capital firm Greylock did promise that “all Inflection investors will have a good outcome today, and I expect good upside in the future.” A post on LinkedIn earlier this week.

Investors in the early US$225 million round of financing will receive 1.5 times their investment; according to The Information, companies participating in the later round of US$1.3 billion in financing will receive 1.1 times their investment. While that adds up to less than $650 million, these investors will also retain their stakes in the remaining startup skeleton. However, the new company will no longer be building a personalized AI chatbot called Pi on a massive computer structure made of 22,000 of Nvidia’s expensive and hard-to-find AI chips. It will now become an AI studio that helps other companies use large-scale language pattern AI.

Inflection did not respond to a request for comment.

Founded in 2022 as an aspiring OpenAI competitor, Inflection has raised more than $1 billion in its short life at a $4 billion valuation from investors including Microsoft co-founder Bill Gates , Microsoft itself and former Google CEO Eric Schmidt, Dragoneer Investment Group, Nvidia, etc.

Take the obvious: Microsoft provided a soft landing for Gates (who technically no longer works at the company, but is still a god-like figure there) and the venture capital firms that sit on its board of directors to help them An expensive and potentially fruitless venture into artificial intelligence. The big cloud vendors are already working with other chatbot partners: Microsoft with OpenAI, Google and Amazon with Anthropic, Cohere with other chatbot partners like Oracle and Salesforce.

If Inflection can perfect Pi on top of its massive AI infrastructure, the race looks lost.

Interestingly, the money Microsoft spent cleaning up the startup may have been worth it. Granted, Suleiman’s reputation as a boss is somewhat murky, according to a 2021 Wall Street Journal investigation into alleged bullying. But Microsoft itself, while becoming kinder and gentler under Chief Executive Satya Nadella, has long remained a difficult place to work.

Who better to hire than the founder of Google DeepMind and a tech genius with LLM experience? The co-founders are familiar with Google’s secrets and the next generation of artificial intelligence. For example, Simonyan helped lead AlphaZero, the artificial intelligence that mastered the board game Go.

Despite its close relationship with OpenAI, Microsoft has many reasons to need backup for its most important artificial intelligence strategy. First, the FTC said it is investigating the deal with OpenAI, as well as Anthropic’s deals with Amazon and Google. If the FTC issues some kind of order, Microsoft better have options.

In addition, according to Business Insider, there is news that the relationship between some Microsoft engineers and OpenAI engineers is not the closest. Then there’s the saga of Sam Altman’s firing, Nadella telling the world he was absorbing much of Altman and OpenAI, only to have the results come back.

There are so many red flags with OpenAI that Microsoft would be wise to abandon its reliance on OpenAI.

Then again, just like Microsoft’s investment in OpenAI, we wonder if regulators will have something to say about the deal as well.