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I'm not savvy on investment terms, but most of these bullet points seem like a loss for Microsoft. What's the value in investing in a smaller company and then
by healsdata 11mo ago
I'm not savvy on investment terms, but most of these bullet points seem like a loss for Microsoft.
What's the value in investing in a smaller company and then giving up things produced off that investment when the company grows?
- yas_hmaheshwari 11mo agoI was thinking exactly the same. Maybe someone who understands these terms and deal better shine light on why would Microsoft agree to this
- justinbaker84 11mo agoI was thinking the same thing.
- soared 11mo agoExponential growth
- drexlspivey 11mo agoYeah poor microsoft, they invested $1B in 2019 and it’s now worth $135B
- ForHackernews 11mo agoNot worth anything until they sell it. There were a lot of excited FTX holders, too.
- gostsamo 11mo agoIf there is need of more capital, you either keep your share without the capital injection and the share goes to zero or you let in more investors, dilute your share, but its overall value increases. Or you can let in more people and sign an agreement that part of the new money will be paid to you in the form of services that you provide.
- onion2k 11mo agoI'm not savvy on investment terms, but most of these bullet points seem like a loss for Microsoft. Having a customer locked in to buying $250bn of Azure services is a fairly big benefit.
- _2d30 11mo agoMSFT had a right to compute exclusivity. "Microsoft will no longer have a right of first refusal to be OpenAI’s compute provider." Seems like a loss to me!
- davey48016 11mo agoI assume that first refusal required price matching. If the $250B is at a higher price than whatever AWS, GCP, etc. were willing to offer, then it could be a win for Microsoft to get $250B in decent margin business over a larger amount of break even business.
- yreg 11mo agoThe risk stays somewhat similar. If OpenAI collapses it won't spend those 250B.
- ml-anon 11mo agoOr a massive opportunity cost. I’d imagine 250Bn of OAI business is way lower margin than 250Bn of some other random companies that don’t need H200s.
- fulafel 11mo agoWhy does this cost them business with the other random companies?
- jasode 11mo ago> and then giving up things produced off that investment when the company grows? An investor can be stubborn about retaining all rights previously negotiated and never give them up... but that absolutist position doesn't mean anything if the investment fails. OpenAI needs many more billions to cover many more years of expected losses. Microsoft itself doesn't want to invest any more money. Additional outside investors don't want to add more billions in funding unless Microsoft was willing to give up a few rights so that OpenAI has a better competitive position against Google Gemini, Anthropic, Grok etc. When a startup is losing money and desperately needs more capital, a new round of investors can chip away at rights the previous investor(s) had. Why would previous original investors voluntarily agree to give up any rights?!? Because their investment is at risk if the startup doesn't get a lot more money. If the original investor doesn't want to re-invest again and would rather others foot the bill, they sometimes have to be a little flexible on their rights for that to happen.
- mrweasel 11mo agoIf Microsoft doesn't believe that OpenAI will achieve AGI by 2030 or that there's a chance that OpenAI won't be the premiere AI company in four years, the deal looks less like a lose and more like they are buying their way out of a risky bet. On the other hand, if OpenAI does well, then Microsoft have a 27% stake in the company and that's not nothing. This looks more like Microsoft ensuring that they'll win, regardless of how OpenAI fairs in the next four to six years.