Microsoft’s M12 drops ROF terms, raises checks and boosts deals

Since its 2016 launch, Microsoft’s M12 venture fund initially made modest investments and used standard corporate VC terms such as right of first refusal. As the broader venture market heated up, M12 faced pressure to deliver stronger financial returns and increase its deal flow.

In response, M12’s leadership—led by global head Michelle Gonzalez—decided to drop ROF and other restrictive terms, raise the typical check size from about $10 million to $20 million, lead more funding rounds, and earmark capital for diversity‑focused investments. These shifts aligned the fund’s incentives with founders while leveraging Microsoft’s go‑to‑market muscle.

Launched 13 unicorns; investments rose from 15 to 55 deals/yr, check size $10M→$20M, diversity deals up to 7/yr.

The venture market’s rapid growth created urgency for M12 to increase its investment pace and returns.

Leadership believed that founder‑friendly terms would attract higher‑quality startups and improve outcomes.

Leveraging Microsoft’s scale allowed M12 to offer valuable commercial support beyond capital.

Removing restrictive terms and aligning financial incentives with founder support can accelerate a corporate venture unit’s performance and deal flow.

After the changes, M12’s investment activity accelerated: it completed 55 deals in 2020 and was on pace to exceed that in 2021, with average check sizes rising to $20 million. The fund helped propel 13 portfolio companies to unicorn status and increased its diversity investments to seven per year, demonstrating a successful shift to a more aggressive, founder‑aligned model.