OpenAI has closed a deal to raise $6.6 billion in new funding, giving the artificial intelligence company a valuation of $157 billion and boosting its efforts to create the world’s leading generic AI technology.
The funding round was led by Thrive Capital, the venture capital firm headed by Josh Kushner, which invested $1.3 billion. Microsoft Corp., OpenAI’s biggest backer, invested about $750 million on top of the $13 billion it had already invested in the startup, according to a person familiar with the matter. Other investors include Khosla Ventures, Fidelity Management & Research Company and. NVIDIA Corp., the chip maker whose powerful processors are at the center of the AI boom. Microsoft declined to comment.
The deal is one of the largest private investments to date, and makes OpenAI one of the three largest venture-backed startups, along with Elon Musk’s SpaceX and TikTok owner ByteDance Ltd. The size of the investment underscores the tech industry’s confidence in the power of AI. And its appetite for extremely expensive research powers its progress.
Other investors writing major checks include Tiger Global Management, which invested $350 million, and Altimeter Capital, which invested at least $250 million, according to people familiar with the matter.
Global backers participating in the round include SoftBank Group Corp and new Abu Dhabi-based tech investment firm MGX. One person, speaking on condition of anonymity because the information is private, said SoftBank’s investment was $500 million. Venture firm Coatue also participated.
In a statement, the company said it would use the cash flow to pursue AI research and expand its computing capacity. “AI is already personalizing learning, accelerating health care progress, and increasing productivity,” said Sarah Fryer, Chief Financial Officer of OpenAI. “And this is just the beginning.”
OpenAI’s huge valuation has shocked Silicon Valley. “People are shocked by the $150 billion,” Altimeter Chief Executive Officer Brad Gerstner said, speaking on stage at the Madrona IA summit in Seattle on Wednesday. But he also cited reports that the startup is expected to generate more than $10 billion in revenue next year — adding that 10 times projected revenue isn’t excessive for a company about to go public, citing Google and Facebook as comparable examples. Given as. The latest deal values OpenAI at more than $150 billion pre-money, before including the dollars raised in this round.
Gerstner also said he expects OpenAI to go public soon, and that it is the logical next step for the startup, which he called “the most important AI company in the United States after Nvidia.”
Bloomberg reported that Apple Inc. did not participate in the deal, although the company had previously been in talks for an investment. The iPhone maker has partnered with OpenAI to integrate chatgpt on its devices and through its Siri voice assistant. As part of that agreement, Apple was previously in discussions to get a board observer role on OpenAI’s board, though those plans were abandoned, people familiar with the matter told Bloomberg.
Some of the funding round was invested through so-called special purpose vehicles, where backers can pool money from a wide range of investors to buy a chunk of shares. For example, in addition to contributing its own capital, Thrive also created an SPV to invest in the company, one of the people said. OpenAI declined to comment on the SPV.
The financing deal follows a tumultuous year for OpenAI. Last November, the company’s board fired the CEO and then immediately reinstated him. Sam AltmanOver the following months, the company rebuilt its board, hired hundreds of new employees and lost several key leaders, including co-founder Ilya Sutskever and chief technology officer Mira Murati.
At the same time, OpenAI is discussing moving from its non-profit structure – an unusual organization that has disappointed investors – to a for-profit model. The move will please the company’s supporters, but could create legal hurdles. As part of a turnaround, OpenAI has discussed giving Altman equity in the company — a stake that could be worth more than $10 billion, though OpenAI’s board said it had not discussed specific numbers.
OpenAI created a passion in Silicon Valley for the potential of AI by launching its chatbot, ChatGPT, in 2022. The company said the tool can generate human-like responses to questions and has garnered 250 million weekly active users. Its paid service, ChatGPT Plus, has 11 million subscribers, one person said. And its business-focused service has more than 1 million users, Bloomberg previously reported.
In recent years a list of new companies have emerged to compete with OpenAI, including several founded by former OpenAI employees – such as Anthropic and Safe Superintelligence. OpenAI is developed by Google and Amazon.com Inc. It also faces intense competition from big tech companies with vast resources, including AI, which are also developing their own AI models.
In this funding round, OpenAI discouraged investors from supporting rival companies like Anthropic or Musk’s AI startup xAI, according to a person familiar with the matter. Bloomberg previously reported that leading venture capital firm Sequoia Capital, which backs SAFE superintelligence, will not participate in the latest fundraise.
