Exactly how much Microsoft is paying all of Inflection AI’s investors as part of its oddly structured deal to walk away with the co-founders, much of the staff and the rights to use the technology has not been publicly disclosed. And Microsoft declined to comment when asked.
But anonymous sources say The information that it is rejecting about $650 million: $620 million in non-exclusive licensing fees for the technology (meaning Inflection is free to license it elsewhere) and $30 million for Inflection to agree not to sue Microsoft for poaching , which includes co-founders Mustafa Suleyman and Karén Simonyan.
Microsoft board member Reid Hoffman, also a co-founder of Inflection and an investor in it, along with Greylock’s VC firm, promised “that all Inflection investors will have a good result today and I expect a good future upside.” in a LinkedIn post earlier this week.
Investors in the first round of $225 million will receive 1.5 times their investment. Those in the next round of $1.3 billion will receive 1.1 times their investment, according to The Information. While that math doesn’t add up to $650 million, those investors will also retain their equity in the shell of the startup that remains. The new company, however, will move away from building a personalized AI chatbot called Pi to a massive computer structure of 22,000 expensive, hard-to-find Nvidia AI chips. It will now become an AI studio that will help other companies work with large AI language models.
Inflection did not respond to a request for comment.
In its short life as a would-be competitor to OpenAI — founded in 2022 — Inflection has raised over a billion at a $4 billion valuation — from who: Microsoft co-founder Bill Gates, Microsoft itself, and former Google CEO Eric Schmidt, Dragoneer Investment Group, Nvidia and others.
Just to state the obvious: Microsoft gave Gates (who is technically no longer at the company but is still a godlike figure there) and his board member’s VC firm a soft landing for the expensive and likely fruitless their AI venture. The big cloud vendors have already teamed up with other chatbot partners: Microsoft with OpenAI, Google and Amazon with Anthropic, Cohere collecting various others such as Oracle and Salesforce.
Although when Inflection ever perfected the Pi in its massive AI infrastructure, the race already seemed lost.
Interestingly, the money Microsoft is spending to hype this startup might be worth it. It’s true that Suleiman has a somewhat murky reputation as a boss, according to a 2021 survey by The Wall Street Journal reporting bullying behavior. But Microsoft itself, while gentler and softer under CEO Satya Nadella, still has one long history as a tough workplace.
And who better to hire than the founder and technical geniuses behind Google DeepMind, now experienced in building an LLM? The co-founders are familiar with Google secrets and next-generation artificial intelligence. Simonyan, for example, helped pioneer AlphaZero, the AI that conquered the board game Go.
Despite its close ties to OpenAI, Microsoft also has plenty of reasons to need a backup for its all-important AI gambit. For one, the FTC said it is reviewing its settlement with OpenAI, as well as Anthropic’s agreements with Amazon and Google. Should any sort of FTC order be issued, Microsoft would be wise to have options.
Additionally, word is that some of the Microsoft engineers and OpenAI engineers don’t have the most cordial relationship, Business Insider reported. Then there was the Sam Altman firing saga that had Nadella telling the world that he was absorbing Altman, and much of OpenAI, to pay it back.
There are so many red flags with OpenAI that Microsoft would be wise to wean its reliance on it.
Again, like Microsoft’s investment in OpenAI, we wonder if regulators will also have something to say about this deal.
