OpenAI closes US$6.6-billion funding haul with investment from Microsoft and Nvidia
OpenAI, the company behind ChatGPT, has raised US$6.6-billion from investors, which could value the company at US$157-billion and cement its position as one of the most valuable private companies in the world.
The funding has attracted returning venture capital investors including Thrive Capital and Khosla Ventures, as well as OpenAI’s biggest corporate backer Microsoft Corp. MSFT-Q, and new participation from Nvidia Corp. NVDA-Q.
The closing of the funds coincides with the company’s continuing restructuring efforts and executive changes, including the abrupt departure of its long-time chief technology officer, Mira Murati, last week.
Altimeter Capital, Fidelity, SoftBank and Abu Dhabi’s state-backed investment firm MGX also participated in the round.
OpenAI chief financial officer Sarah Friar told employees on Wednesday that the company will be able to provide liquidity for them through a tender offer to buy back their shares in the company following the funding, although no details and timing have been decided, according to a source. Earlier this year, the company allowed some employees to cash out their shares at a valuation of US$86-billion.
Thrive Capital, which committed about US$1.2-billion from a combination of its own fund and a special purpose vehicle for smaller investors, also negotiated the option to invest another US$1-billion next year at the same valuation if the AI firm hits a revenue goal, sources added.
Apple Inc., which was in talks to invest in OpenAI, did not end up joining the funding, said sources, who requested anonymity to discuss private matters.
The funding came in the form of convertible notes, and the conversion to equity hinges on a successful structural change into a for-profit that would no longer be controlled by the non-profit board and the removal of cap on returns for investors.
The personnel changes haven’t deterred enthusiasm from most investors, who are anticipating significant growth based on the projections by OpenAI chief executive officer Sam Altman and Ms. Friar.
The company is on pace to generate US$3.6-billion in revenue this year on mounting losses of more than US$5-billion. It projects major revenue jump next year to US$11.6-billion, according to sources familiar with the figures.
Investors have also secured some protections as OpenAI undergoes the complex corporate restructuring that would grant Mr. Altman equity. The talks are still continuing, and no timeline has been determined yet.
Investors have negotiated terms that would allow them to claw back their capital or renegotiate the valuation if the changes are not implemented within two years, sources said.
OpenAI’s meteoric rise in terms of product popularity and valuation has captured the world’s imagination. Since the launch of ChatGPT, it has attracted 250 million weekly active users. The company’s valuation has also risen from US$14-billion in 2021 to US$157-billion as it grew revenue from zero to US$3.6-billion, far exceeding Mr. Altman’s own projections at the time.
The company has told investors it is still actively pursuing artificial general intelligence (AGI), meaning developing AI systems that surpass human intelligence, as it ramps up commercialization and tries to be profitable.
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