The exact figures surrounding the recent deal between Microsoft and Inflection AI remain undisclosed to the public, despite inquiries. However, sources familiar with the matter suggest a substantial sum of around $650 million. This includes $620 million allocated for non-exclusive licensing fees for Inflection’s technology, allowing the company freedom to license elsewhere, and an additional $30 million to settle any potential legal disputes stemming from Microsoft’s recruitment of key personnel, including co-founders Mustafa Suleyman and Karén Simonyan.
Reid Hoffman, a Microsoft board member and co-founder of Inflection, assured investors in a recent LinkedIn post that they would see favorable returns from the deal. According to reports from The Information, early investors in Inflection’s $225 million round are set to receive 1.5 times their initial investment, while later investors in the $1.3 billion round will receive 1.1 times their investment. Additionally, these investors will retain equity in the restructured company, which is shifting its focus from developing a personalized AI chatbot named Pi to becoming an AI studio assisting other companies in leveraging large language model AI.
Inflection declined to comment on the matter.
Having attracted over a billion dollars in funding at a $4 billion valuation since its inception in 2022, Inflection garnered investments from prominent figures and entities such as Bill Gates, Microsoft, Eric Schmidt, Dragoneer Investment Group, and Nvidia.
Microsoft’s involvement in acquiring Inflection serves as a strategic move to provide a graceful exit for stakeholders, including Gates and Hoffman’s VC firm, from what could have been a costly AI venture. The tech giant already boasts partnerships with other chatbot providers like OpenAI, while competitors such as Google and Amazon have their own arrangements.
Despite potential regulatory scrutiny, Microsoft’s decision to acquire Inflection could prove beneficial in the long run. While Inflection’s co-founder, Mustafa Suleyman, has faced criticism for his management style, Microsoft sees value in acquiring talent with experience in cutting-edge AI technologies. Moreover, amidst tensions between Microsoft and OpenAI, having alternative AI partnerships becomes crucial, especially given ongoing regulatory investigations and internal dynamics.
In light of Microsoft’s prior investment in OpenAI and Inflection’s strategic value, the deal raises questions about potential regulatory implications. However, Microsoft’s proactive approach in diversifying its AI partnerships suggests a calculated move to mitigate risks and maintain competitive advantage in the evolving AI landscape.
