Earlier this year, Microsoft quietly announced a “new” mission and investment strategy for its nearly seven-year-old venture fund, M12. The post, published with little fanfare in early January, was kind of vague, and I was curious to find out more—about what the changes practically meant for M12 within the overall VC space and for its portfolio companies. What I found was that there’s been a big shift at the fund over a year in the making, which has prompted “tough” internal conversations under new management, while at least eight employees have left M12 since the summer of 2021.
I dug into the before and after at M12 in my latest deep dive. As an independent corporate VC fund set up by Microsoft in 2016, M12 built on the company’s long history of backing founders, all the way back to its massive venture losses during the Dot Com bust. M12’s founders Peggy Johnson (now the CEO of Magic Leap) and Nagraj Kashyap designed the fund to be “a different kind of corporate VC,” as Kashyap wrote in 2018. The fund focused primarily on financial returns—that was their “true Northstar,” as one former employee told me. But since mid-2021, things have been changing.
