Microsoft’s venture capital arm, M12, cannot claim credit for the significant early investment in OpenAI, the creator of the popular ChatGPT chatbot. The transformative deal, which played a crucial role in establishing Microsoft as an AI leader, was managed by corporate leaders. Nevertheless, M12 has substantial resources at its disposal—$275 million for this fiscal year—as it seeks opportunities to invest in promising startups, according to two sources familiar with the matter. The exact amount has been a closely guarded secret until now.
Microsoft annually replenishes M12’s funds from its balance sheet, and the allocated amount has remained relatively stable in recent years, the sources disclosed. Typically, the fund does not exhaust its entire allotment, investing between $150 million and $250 million annually in startups. The fund currently boasts 110 active investments in its portfolio, including AI platform Typeface.ai. Microsoft recently integrated this startup’s technology, which utilizes generative AI to assist companies in creating social content, into its consumer insights platform. Additionally, Microsoft has invested in startups like Split.io and made its delivery platform accessible to developers using Microsoft’s Azure services.
Established in 2016 as Microsoft Ventures, the VC fund underwent a significant strategic shift in the past year under Michelle Gonzalez, corporate vice president and global head. Gonzalez, who joined in 2021, announced that M12 would shift its focus to fund startups more closely aligned with Microsoft’s priorities, particularly in AI, cloud infrastructure, and cybersecurity.
Last year’s shift in strategy, though met with resistance from some within M12, may reflect a move away from an emphasis on financial returns. For a company with $212 billion in revenue last year, the impact of returns on a $275 million investment is unlikely to be significant. Instead, the focus is on funding businesses that can enhance Microsoft’s products, as demonstrated by the strategic benefits of the $13 billion investment in OpenAI. This investment, completed by Microsoft itself and not M12, has positioned Microsoft as a major player in AI, with OpenAI’s technology integrated into products like Copilot, an AI assistant incorporated into nearly every Microsoft product.
