Acqui-hires and Big Tech

On 19 March 2024 Microsoft announced that Mustafa Suleyman, a co-founder of DeepMind and of the start-up Inflection AI, would become an executive vice president and chief executive of a new organisation, Microsoft AI, reporting to Satya Nadella and running the consumer Copilot, Bing and Edge. Karén Simonyan, Inflection's other technical co-founder, would be its chief scientist, and most of Inflection's ~70 employees would join them (company, reported). The same day Inflection said it would become an "AI studio" selling to enterprises through Azure and other clouds, under a new chief executive, Sean White (company). Microsoft bought no shares. It paid about $620 million for a non-exclusive licence to Inflection's models and about $30 million for Inflection's agreement not to pursue legal claims over the hiring (The Information, reported).

Inflection had raised about $1.5 billion, including a $1.3 billion round at a valuation of about $4 billion in June 2023 (reported), to build Pi, a friendly personal assistant with about 1 million daily and 6 million monthly users in March 2024 (company). It had no meaningful revenue, and its next model would have needed several times more compute. Its investors were repaid from the licence fee at a reported 1.1 to 1.5 times their money, depending on the round (reported, verify). Reid Hoffman, an Inflection co-founder, sat on Microsoft's board. On 4 September 2024 the UK's Competition and Markets Authority concluded that the arrangement was in substance a merger, because Microsoft had acquired Inflection's team, know-how and an IP licence, but cleared it because Inflection was small (CMA decision, reported).

This chapter explains the licence-and-hire, the structure Big Tech used from 2024 to take the people from AI start-ups without buying the companies, who gets paid in it, and why regulators came to treat it as a merger in all but name.