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Microsoft’s venture capital arm, M12, has 110 active investments. getty
Microsoft’s venture capital arm can’t take credit for its parent company’s blockbuster initial investment in OpenAI, the maker of the buzzy chatbot ChatGPT. The deal, which helped turn the tech giant into a leader in artificial intelligence, was handled by the company’s leaders.
But M12, Microsoft’s in-house venture capital firm, has plenty of cash at its disposal as it looks to invest in its next big venture, with people familiar with the matter saying it has $275 million this year. Two people involved said. luck. Until now, this number has been a closely guarded secret.
Microsoft replenishes M12 with funds from its balance sheet each year. Officials say the amount of donations has remained relatively stable in recent years. Funds typically do not use all of their allocation. In recent years, the fund has invested between $150 million and $250 million a year in startups, said the people, who requested anonymity due to the sensitivity of the fund’s finances.
It has now been revealed that M12 has 110 active investments in its portfolio. luck, Including the AI platform Typeface.ai. Last week, Microsoft integrated the startup’s technology, which helps businesses create social content using generative AI, with its consumer insights platform. Microsoft also invested in startup Split.io to make its delivery platform available to developers using Microsoft’s Azure services.
Microsoft launched a VC fund in 2016 called Microsoft Ventures. At the time, the fund invested less than $100 million a year, one source said.
Last year, M12 (the “M” for Microsoft, the number 12 for “entrepreneur”) made a major strategic shift under corporate vice president and global head Michelle Gonzalez, who joined in 2021. The fund previously operated more businesses. Invest independently and as a generalist, focused on financial returns. However, Gonzalez announced in January 2023 that he would shift funding to startups that more closely align with Microsoft’s priorities: AI, cloud infrastructure, and cybersecurity.
“Over the past 12 months, we realized that startups and Microsoft needed a new M12, so we developed a more focused investment strategy that worked closely with Microsoft,” Gonzalez said. said in a statement. luck. “This has allowed us to create exceptional value for our connections, our customers and our portfolio through unique benefits.”
Last year’s changes were not welcomed by some inside the M12. luck As previously reported, neglect of economic interests may be the cause. For a company like Microsoft, which had $212 billion in revenue last year, the return on a $275 million investment is unlikely to have a material impact on the company. But funding companies that could enhance Microsoft’s own products could have a bigger strategic advantage.
The most obvious example is the company’s $13 billion investment in OpenAI, which was completed by Microsoft rather than M12. Microsoft, which made its first investment in 2019, has emerged as a major player in AI. We use OpenAI technology in Copilot, the AI assistant integrated into nearly every Microsoft product.
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