M.G. Siegler • #meta • Jun 19, 2025

Meta Hackquires a VC Fund

"Team Superintelligence" continues to assemble at Meta, but it's getting even more awkward...

Meta may have been late to the "hackquisition" market, but give them credit, they're innovating fast. Last week, the Scale AI deal sort of redefined the market by making every "hackquisition" before it look more like a "hackquihire" by comparison. And today brings a new twist:

Meta Platforms is in advanced talks to hire the prominent artificial intelligence investors Nat Friedman and Daniel Gross to help lead its AI efforts, according to a person familiar with the discussions. As part of those talks, Meta is in discussions about partially buying out Friedman and Gross’ venture capital fund, NFDG, which holds stakes in top AI startups and is worth billions of dollars on paper, the person said.

Yes, this would be Meta "hackquiring" not an actual startup, but a venture fund that invests in startups. But while the contours change, the main driving force remains the same: for Mark Zuckerberg to bring on board top talent for their AI efforts. No matter the cost. [See update below for a fun twist.]

So how does one "hackquire" a venture fund? Unsurprisingly, it's complicated:

As part of the talks, Meta is discussing buying out a substantial portion of NFDG’s holdings and cashing out the fund’s limited partners in the process, the person familiar with the discussions said. The social media giant will have minority stakes in the startups that NFDG has invested in, which could include SSI, but it will not get information about and control over these startups, the person said.

Although financial terms of the discussions couldn’t be learned, a partial buyout of the fund could cost more than $1 billion.

This sounds like Meta would be acquiring stakes in the fund from the LPs who own them. But presumably far more important would be buying out the General Partner (GP) stakes in the fund as they control (and are technically controlled by) the actual management company. This means buying out the stakes Friedman and Gross own. And this of course makes sense because Meta needs to entice them to walk away from their fund to join Meta, just as they had to entice Alexandr Wang to walk away from Scale AI to join Meta. Usually that involves money. A lot of it.

But at least partially cashing out the LPs is important too so they don't try to block such a deal. Buying out venture funds happens from time to time, but it's usually under far different circumstances. Still, the one constant would be lawsuits. When people feel like they gave money for something and the deal was changed under their feet, they tend not to like that. Again, money usually solves it.

But that will also lead to an awkward situation, not entirely dissimilar to the Scale issue: Meta will end up owning a bunch of stakes in other, smaller companies in which NFDG invested. Or rather, rights to such stakes, as managed by the fund. That's another complicating element here: it's not like NFDG is going to liquidate their holdings with this deal, seemingly no one would want that. I mean maybe Meta would, but it would be more or less impossible. Perhaps Meta could find another buyer for the stake in the fund they're buying, but again, that would just add another layer of complexity. And like the Scale deal, they probably want to feel like they're getting something (beyond the talent) for all the money...

What the government may think about Meta buying stakes in dozens of AI startups in one fell swoop... we'll see! Sure, they'd all be minority stakes, but well, they're always minority stakes! That's the entire point of the "hackquisition" market...

But none of that is even the most awkward part of this deal! That would be this:

For Gross, the talks with Meta put him in an awkward position with SSI, a startup formed with the goal of building a leading AI company “insulated from short-term commercial pressures.” The startup hasn’t yet launched a product or described in detail what it planned to build.

Gross’ departure for Meta would damage an important investment for some top venture capital firms. In April, SSI raised $2 billion, at a $32 billion valuation, from investors such as Greenoaks, Andreessen Horowitz and Lightspeed Venture Partners. It has also raised money from Sequoia Capital.

SSI is 'Safe Superintelligence', the startup Gross co-founder with one Ilya Sutskever. And the one that yes, is currently valued at $32B – pre-product. Well, that's a bit unfair because it's actually not entirely clear they intend to have an actual product. By at least the early accounts, their main aim is to create "superintelligence" – the artist formerly known to some as "AGI" but which now has been rebranded to mean something beyond AGI since we're apparently close to AGI even though no one yet has an actual definition of AGI. As I wrote – incidentally exactly one year ago – upon the formation of SSI:

I'm reminded of Coca-Cola Classic. That is, the branding the soda company had to go with after the 'New Coke' debacle in the 1980s to let everyone know that the original product they knew and loved was back. 'Safe Superintelligence' sounds a lot like 'OpenAI Original'.

If you've seen the term "superintelligence" in the news recently, it's because that's also the goal for this new team Zuck is putting together for Meta. So yes, Gross will be joining a new team that will be racing his old team. I made the quip last night that perhaps the effort should be called "Unsafe Superintelligence" given that it's, well, Meta. But then I realized that I already made that joke in that post a year ago about OpenAI, for shame.

Anyway, what are those SSI investors going to think about this deal?¹ Presumably they care most about Sutskever in this context, but certainly Gross was a key part of that equation and bet as well, he was CEO! And now he no longer will be, it seems. Maybe it gives an opening for his former employer to swoop in to buy SSI? Ilya Sutskever inside of Apple would be something else...

Update June 20, 2025: Well now the above makes a bit more sense – in the sense that Zuckerberg is absolutely ruthless. As Kate Rooney reports for CNBC, the original plan was to "hackquire" Safe Superintelligence itself and/or bring Ilya Sutskever himself on board. When he turned down that offer, Zuck turned to Gross, Rooney reports. Clearly, to get that deal done, Meta had to do this NFDG deal. At least from the outside, this is not the best look for Gross here...

Update July 1, 2025: Mark Zuckerberg has now announced the first batch of hires internally, including Friedman but interestingly, not Daniel Gross...

Update July 3, 2025: And sure enough, the Daniel Gross shoe has finally dropped. As it turns out, he is joining Meta, as Shirin Ghaffary and Kurt Wagner report for Bloomberg. And yes, it seems likely that his deal wasn't finalized yet when the others were announced per above (or else Zuckerberg would have announced it, obviously). Though interestingly, Ilya Sutskever, in commenting on the news, noted that Gross technically stopped working for SSI on June 29 – the day before Zuck's memo. Perhaps that's just a vesting/leaving issue and he hadn't yet finalized his Meta deal. No word on Gross' deal terms, though he'll apparently be working on "AI products". Imagine that.

Yuliya Chernova of WSJ also has more details about how Meta is structuring the "hackquisition" of Gross and Nat Friedman's NFDG fund, confirming a lot of what was previously reported. One new key detail: Meta would apparently be paying current book value for the "up to 49%" stake they buy from LPs, meaning a nice, quick and easy 4x return on those positions (while the rest presumably can ride...).

With those numbers in mind, we can do some quick and dirty math here. If the $1.1B fund is "about half" deployed – let's call it $500M to make it easy – and the book value of those holdings is up 4x, that's $2B. If Meta is acquiring "up to 49%" – again, let's call it 50% to keep it simple – that's $1B that they're likely paying for the stakes. And it's also stated that the fund won't make new investments, so they're presumably returning that remaining $500M to LPs. So that's $1.5B returned on the $500M invested, with $500M (currently marked up 4x) still riding. A nice, quick and clean return for investors with good upside potential left!

Also, assuming Gross and Friedman got a slight premium on the "2 & 20" model, let's guess they have 2.5/25 terms on the fund. That means they would likely get 25% of $500M (the profit of the fund after $500M deployed is fully paid back to LPs, and the unused $500M is returned). That's $62.5M each (minus any carry they gave to others helping with the fund) for a couple years worth of work, not bad. And they still have the upside on the money left riding too – which is now in carry and again, marked up 4x on paper... So that's another $250M worth of carry as it stands right now — each.

And presumably Meta added some sweeteners on top of the above to get them to walk away from their fund. A "Godfather" offer perhaps?...

And how's this for awkward: that fund's crown jewel? Safe Superintelligence.