Microsoft Pays Inflection AI $650m After Poaching Staff

Microsoft is reportedly paying AI firm Inflection some $650 million (£516m) in association with its unusual hiring spree at Inflection last week, which saw it hiring the start-up’s co-founders as well as most of its staff, as well as licensing its technology.

While the terms of the deal were not disclosed, The Information and Bloomberg reported that Microsoft would pay $620m for non-exclusive licensing fees for the technology, as well as $30m to ensure the now much smaller Inflection will not sue over Microsoft hiring its staff.

Microsoft board member Reid Hoffman, who is a co-founder of Inflection along with Mustafa Suleyman and Karen Simonyan, said in a blog post on Microsoft-owned LinkedIn last week that all of Inflection’s investors would have a “good outcome”, adding that he anticipated a “good future upside”.

Investors in Inflection’s early $225m funding round are receiving 1.5 times their investment, while those in its later $1.3bn round are receiving 1.1 times their investment, according to The Information.

Image credit: Turag Photography/Unsplash

Return on investment

The return on investment includes Microsoft’s $650m as well as their existing equity in Inflection.

Inflectionis meanwhile planning to shift its strategy from providing a personalised AI assistant called Pi – in direct competition with OpenAI and others – and will instead assist other companies working with large language models (LLMs).

Inflection’s investors include major industry figures such as Bill Gates, Microsoft itself, former Google chief executive Eric Schmidt, Dragoneer Investment Group, and Nvidia, as well as Reid Hoffman’s venture capital firm Greylock.

The unusual tactics come as regulators are investigating Microsoft’s large investments into and close relationship with OpenAI, and may be intended as a way of giving the company a backup plan in case restrictions are imposed upon that arrangement.

Regulatory scrutiny

It remains to be seen whether regulators will take an interest in the Inflection hiring spree.

Microsoft hired most of Inflection’s 70 staff as well as Suleyman and Simonyan and the now much smaller company is now seeking to offload some of its unneeded compute capacity, according to Bloomberg.

Inflection retains its proprietary technology and said in a blog post last week it is well positioned to serve companies including Microsoft.

“Our success at training, tailoring and improving the performance of large AI models makes us uniquely well-placed to be the AI platform for businesses around the world,” the company said.

Matthew Broersma

Matt Broersma is a long standing tech freelance, who has worked for Ziff-Davis, ZDnet and other leading publications

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