2024Technology / AI

Microsoft ← Inflection AI

Microsoft Pays $650M to Hire Inflection AI's Entire Leadership and Most of Its Staff

A creative deal structure that brought DeepMind co-founder Mustafa Suleyman to lead Microsoft's consumer AI while avoiding antitrust scrutiny

Deal Value

$650M

Team Size

CEO + most of 70 employees

Industry

Technology / AI

In March 2024, Microsoft stunned the AI world by hiring Inflection AI's co-founders Mustafa Suleyman and Karén Simonyan, along with most of the startup's 70 employees. Microsoft paid approximately $650 million—$620 million to license Inflection's AI models and $30 million for legal waivers—while leaving Inflection intact as a company to avoid regulatory scrutiny.

Background

Inflection AI was founded in 2022 by Reid Hoffman, Mustafa Suleyman (DeepMind co-founder), and Karén Simonyan. In June 2023, it raised $1.3 billion at a $4 billion valuation.

The startup had positioned itself as a competitor to OpenAI and Anthropic, developing Pi, a chatbot focused on emotional support and conversational AI.

Suleyman had co-founded DeepMind, which Google acquired for over $500 million in 2014. He was one of the most respected leaders in AI.

Microsoft, despite its partnership with OpenAI, wanted to build its own consumer AI capabilities with proven leadership.

The Move

On March 19, 2024, Microsoft announced it had hired Suleyman and Simonyan to form a new organization called Microsoft AI, focused on Copilot and consumer AI products.

Most of Inflection's approximately 70 employees joined Microsoft alongside the founders.

Microsoft paid $620 million to license Inflection's AI models and approximately $30 million for legal waivers related to the mass hiring.

Critically, Inflection remained intact as a company—Microsoft absorbed the staff without formally acquiring the entity, avoiding automatic regulatory review.

Key Players

Mustafa Suleyman

Inflection AI CEO & Co-founder → Microsoft EVP & CEO of Microsoft AI

DeepMind co-founder, one of the most influential figures in AI. Now leads Microsoft's consumer AI efforts.

Karén Simonyan

Inflection AI Co-founder → Microsoft AI

Technical co-founder who helped build Inflection's AI capabilities.

Reid Hoffman

Inflection AI Co-founder & Board Member

LinkedIn co-founder who also sits on Microsoft's board, creating alignment between the companies.

Why It Worked

•The deal structure avoided antitrust scrutiny—Microsoft hired staff and licensed tech without acquiring Inflection.
•Suleyman brought instant credibility and leadership to Microsoft's consumer AI efforts.
•Reid Hoffman's presence on both sides helped facilitate an arrangement that worked for all parties.
•Microsoft got proven AI talent and technology while Inflection investors received value.

Challenges

•UK's Competition and Markets Authority launched a probe, though it concluded the deal didn't threaten competition.
•Inflection pivoted to enterprise AI for business workflows with a skeleton crew.
•Questions about whether this sets a precedent for avoiding M&A regulation through creative structures.

Outcome

•Suleyman became EVP and CEO of Microsoft AI, immediately leading Copilot development.
•Microsoft gained world-class AI leadership without the regulatory burden of an acquisition.
•The deal demonstrated how "acqui-hire" structures can work at billion-dollar scale.
•Inflection survived as a company, pivoting to enterprise AI under new leadership.

Lessons for Other Liftouts

1.Creative deal structures (licensing + hiring) can achieve acquisition outcomes without acquisition scrutiny.
2.Having aligned stakeholders (like Hoffman on both sides) enables complex negotiations.
3.The most valuable asset in AI companies is often the people, not the technology itself.
4.Leaving the target company intact preserves optionality and reduces regulatory risk.