The process of poaching Inflection AI from Microsoft costs more than $1 billion, an insider says

When microsoft Announced last week It has hired two of the three Inflection AI founders, as well as most of the startup’s employees. Little is known about the deal except that it also contains guarantees for the startup’s investors, and that the tech giant also bought the rights to sell access to Inflection’s most powerful model. Now more details are starting to emerge.

The companies confirmed that Microsoft paid Inflection AI $620 million for the non-exclusive right to sell access to the Inflection AI model through the Azure Cloud over several years. Microsoft paid an additional $33 million to waive claims against it related to the hiring of Inflection employees. However, according to an internal document shared with… Fast companyThis was only one aspect of the agreement.

A portion of this total amount of $653 million may be allocated to repurchasing shares of existing Inflection shareholders, who received a guarantee of $1.50 for every dollar of shares they own. Inflection expects to pay $380 million for this purpose, according to the document.

Neither company disclosed the value of the compensation package Microsoft awarded to Mustafa Soliman, Inflection’s founder and former CEO, who now leads Microsoft’s consumer AI division. Solomon’s compensation package was based on the market rate for someone of his lineage, on the amount of stock he owned in Inflection, and on his future performance and the performance of his AI division at Microsoft, says a Microsoft source familiar with the agreement. Solomon will be paid in the form of a salary, performance bonuses and Microsoft stock that will vest over 10 years. (Microsoft and Inflection declined to comment officially.)

After factoring in typical licensing fees, concession fees, and executive and employee compensation, Microsoft’s deal with Inflection is likely worth more than $1 billion, says a source with direct knowledge of the deal, who spoke on the condition of anonymity because the terms and conditions of the deal have not been announced. .

Inversion investors did not fare well. Those who participated in Inflection’s first funding round were promised an upside return of $1.50 on every dollar they invested in Inflection, says the source familiar with the deal. Inflection AI will now act as a B2B licensor for the Inflection AI model. Investors who came over The second investment round The source said that last June, the company received an upward return of $1.10 on every dollar invested. But the new B2B version of Inflection has a much smaller advantage than the original Inflection, which was valued at $4 billion.

Neither Microsoft nor Inflection mentioned the compensation details (or the number) of Inflection employees who moved to Microsoft, nor the value of the compensation package awarded to Karen Simonyan, one of the founders of Inflection, who will help Soliman manage the consumer AI division.