Microsoft’s Inflection point: Acquire what you can’t create
It’s almost impossible for an artificial intelligence (AI) startup to build anything as good as ChatGPT, but a company called Inflection was getting there. Last year the Palo Alto, California-based firm raised $1.3 billion in a single fund-raising round to turn its chatbot Pi into a personal assistant for everything. It built up a phenomenal cache of computing power, gaining access to thousands of coveted graphics-processing unit chips from Nvidia and was on track to surpass OpenAI’s free version of ChatGPT with a model it had built, remarkably, from scratch.
Compared to most startups, Inflection’s path to success looked smooth. So it came as a shock to the industry on Tuesday when Inflection announced that its co-founders Mustafa Suleyman and Karén Simonyan, along with most of its employees, would be joining its investor Microsoft as employees, and that Suleyman would lead the software giant’s consumer AI business. What happened? Had Inflection run out of all that money in less than a year? If large portions of the funding were in cloud credits, perhaps it had, and those credits can now flow back to Microsoft.
Suleyman also told Bloomberg last year that Inflection lacked a business model. But plenty of tech startups have coasted on venture capital dollars for years before being able to open the revenue spigots. That Inflection has been swallowed so quickly by Microsoft underscores a stark new reality: With AI, legacy tech companies are sucking the innovation out of the room like a giant squid and more rapidly than with previous waves of technology.
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