Microsoft's AI Startup Hunger Games

∆ Tech in the News

"Effective Safeguards" - The UN General Assembly unanimously approved a resolution supporting safe, trustworthy, and human-centric AI.

‘Historic’ Chip Spend - Pres. Biden awarded $20B in CHIPS Act grants to Intel to further its $100B plan to build microchip plants across four states.

Mind Control - Neuralink’s 1st patient demonstrates the “Telepathy” product by moving a PC cursor to play chess with his mind. Musk says the next product Blindsight will cure blindness, claiming it is already working in monkeys.

Apple Slapped - The D.O.J. and 16 states filed a major federal antitrust suit accusing Apple of illegally monopolizing the smartphone market.

“Materially Better" - OpenAI may release GPT-5 around mid-year with enterprise customers already seeing demos including AI Agent features.

IPOs Back? - Reddit ended its first day on the NYSE up 48% from its offering price, far above historical average returns despite Reddit not being profitable.

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The Hottest Thing in Tech this Week

Inflection and the AI Startup Hungergames

Tech giants are devouring promising AI startups and elite talent, fueling an epic industry consolidation. Microsoft's $650M "acqui-hire" deal to absorb unicorn Inflection AI and its co-founders highlights how complex arrangements are circumventing regulatory scrutiny over traditional acquisitions. Inflection had already raised $1.5B from Microsoft, Nvidia, Bill Gates, and Reid Hoffman before the deal. Co-founders, former DeepMind Scientist, Mustafa Suleyman and Karen Simonyan will be CEO and CSO of a new Microsoft AI Division.

For cash-strapped startups, the expected paths lead to exits via deep-pocketed investors and partners. However, the exorbitant costs of cutting-edge AI and tough competition from compute and data-rich players like OpenAI, Google, and Amazon are forcing a reassessment of that model. Inflection’s backers only came away with a 1.1x - 1.5x return under the licensing fee, hardly the payday they expected. As the upstarts struggle, the tech giants' bargaining power grows.

Talent Wars

The battle for the best AI talent is on, with big tech luring pioneers to gain the strategic edge. For example, the main lure of Inflection was the team’s success in building AI systems like its popular Pi conversational chatbot with human-centric AI focus. So Copilot may soon be getting a personality transplant.

The Enterprise Pivot

Enterprise AI is emerging as the only option for companies like Inflection, with cloud giants poised to be "model foundries" for corporate AI factories. Inflection will retain its proprietary technology and license it to Microsoft for delivery to its large client base through Azure and 365. The deal illustrates again how cloud services are emerging as a dominant AI services delivery channel.

However, regulatory scrutiny may kill the monopolistic party. Antitrust hawks are blasting these deals as anti-competitive, with calls for a crackdown through blocked tie-ups, mandated licensing, or cloud AI spin-offs. No wonder the deal ringfenced $30M to address “legal matters” associated with the mass hiring.

The big problem here is concentrating AI talent and IP in a few firms risks stifling diversity of innovation. Whether Big Tech's AI feasting sparks breakthrough innovation or kills it remains to be seen. Lower compute costs may help over time, but by then, oligopoly could already be in effect. Invest with care!

Deals We’re Watching

Founders to Watch and Opportunities to Catch

Open Deals:

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1. Simplifying the entire tax process - US Based - Using AI to eradicate manual tasks and errors and make the tax process simple and efficient. Previous YC. (Pre-seed)

2. VC firm specializing in Enterprise/B2B software - Seed-stage investments. $40M allocated to 30 companies, 2 IPOs and 7 M&A exits. $4.5B in follow-on capital from major VCs like Insight Partners, NEA, and Sequoia.

3. Compliant IOT solution for hospitals to track their data - San Diego, CA - 25% cheaper IOT tracking device than competitors, 6 utility patents and 20+ pending. Team has had significant past exits and raises and seeks growth funds. (Seed)

4. Enterprise AI to drive insights from company data - NYC - Current customers incl. Pfizer, Lacoste, & Hotel Engine, $1M in ARR, 7x growth in ’23. (Seed)

5. Media-Tech Investor Network - US Based - Established media/tech platform launching AI intro engine, designed to optimize professional networking in the tech space. ~700k subscribers. Post Rev. (Seed)

6. Outbound B2B Campaign AI Co-Pilot - Lexington, MA - Turn any CRM into an AI optimized sales agent for personalized customer campaigns. Founder previous exit to PE. Notable Angel on board. Hubspot and Saleforce API. Post revenue. (Pre-Seed)

Raising for your startup? Send us your Open Round —> [email protected]

Closed Deals:

In Vivo RNA Tech - San Diego RNA therapy biotech startup Capstan Therapeutics closed a $175M Series B backed by J&J Innovation & Mubadala.

Figure Markets - A spinoff from San Fran Fintech Figure raised $60M for a "blockchain-native" asset trading platform from Jump and Lightspeed.

CyberSaint - This Boston fintech startup raised a $21M Series A to use AI and actuarial data to manage and quantify cyber risk and compliance.

“Large Emotion Model” - Westpoint Google Cloud Startup Partner, Zenapse, raised an $8M Seed for its AI SaaS marketing platform using a proprietary “LEM” to build emotionally intelligent experiences.

AI Assistants - San Fran AI Assistant startup Quilt closed a $2.5M seed round led by Sequoia and backed by DataDog, HubSpot, Asana, and a16z.

AI Data Analytics - Miami’s Neural Earth raised $1.4M pre-seed funds for its AI/data-powered property & casualty insurance insights platform.

Companies to Watch:

Foundry - The Palo Alto stealth startup launched with an $80M Series A backed by Lightspeed, Sequoia, Microsoft, and Deepmind’s Jeff Dean. It’s a novel public cloud/orchestration platform simplifying AI compute utilization.

Copilot - NY-based personal budgeting app has 100K+ subs saving ~5% each and just lost its’ main rival, Mint. A $6M Series A will help it add AI capabilities.

The Funding Buzz

Saudi Arabia - A planned $40B Public Investment Fund focused on AI, possibly in partnership with a16z, would be the largest VC in the market.

IVP - Silicon Valley mainstay firm raises $1.6B for its 18th fund, with past successes like Twitter, Snap, Netflix, and CrowdStrike.

B Capital - Facebook co-founder Eduardo Saverin's California firm closed its second Opportunities Fund, with $750M for existing portfolio tech companies.

Inevitable Games Fund - New VC debuts with $100M to invest in early-stage Web3 gaming startups.

Zero Prime Ventures - Closed its second fund at $48M to back AI startups at the earliest stages. LPs include Foundation, Bain, Sequoia, & Founders Fund.

Trending Tools and Buzzy Tech

Trending Tools

NVIDIA - Project GR00T multimodal AI "mind" for advanced humanoid robots.

GitHub - Beta CodeQL AI tool automatically finds and fixes code vulnerabilities.

Google DeepMind - TacticAI GenAI predictive system for soccer tactics.

Buzzy Tech

CRISPR - Researchers prove method to cut HIV infection out of cells.

Nuclear Starships - New nuclear reactor type to power spacecraft for 10 years.

MindEye2 - Stability/Princeton make a leap in reconstructing seen images.

‘Mass human experiment’ - Toyota’s $15B Mt Fuji smart ‘Woven city’ pilot.

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