(Bloomberg) — OpenAI struck a deal to raise $6.6 billion in new funding, giving the artificial intelligence company a $157 billion valuation and bolstering its efforts to build leading generative AI technology in the world.
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The round was led by Thrive Capital, the venture capital firm led by Josh Kushner, which invested $1.3 billion. Microsoft Corp., OpenAI’s largest backer, has invested about $750 million, on top of the $13 billion already invested in the startup, according to a person familiar with the matter. Other investors included Khosla Ventures, Fidelity Management & Research Co. and Nvidia Corp., the chipmaker whose powerful processors are at the center of the AI boom. Microsoft declined to comment.
The deal is one of the largest private investments ever and makes OpenAI one of the three largest venture-backed startups, alongside Elon Musk’s SpaceX and TikTok owner ByteDance Ltd. The scale of the investment underscores the tech industry’s confidence in the power of AI. and its appetite for the extremely expensive research that fuels its progress.
Other investors who wrote large 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 in the round included SoftBank Group Corp. and new technology investment firm MGX, based in Abu Dhabi. SoftBank’s investment was worth $500 million, according to one of the people, who asked not to be identified because the information is confidential. Investment firm Coatue Management invested $250 million, and venture capital firm Quiet Capital also participated.
In a statement, the company said it would use the influx of cash to advance AI research and increase its computing capacity. “AI is already personalizing learning, accelerating advances in healthcare and boosting productivity,” said Sarah Friar, CFO of OpenAI. “And this is just the beginning.”
OpenAI’s enormous valuation has fascinated Silicon Valley. “People are shocked by $150 billion,” said Brad Gerstner, CEO of Altimeter, speaking on stage at the Madrona AI Summit in Seattle on Wednesday. But he also cited reports that the startup expects to generate more than $10 billion in revenue next year – adding that a multiple of 10 times projected revenue is not exorbitant for a company on the point of entering the stock market, giving Google and Facebook as comparable examples. The latest deal values OpenAI at more than $150 billion, before including dollars raised in this round.
Gerstner also said he hoped OpenAI would go public soon and that it was the logical next step for the startup, which he called “the most important AI company in the United States, after Nvidia.” .
Apple Inc. did not participate in the deal, although the company was previously in talks to invest, Bloomberg reported. The iPhone maker has a partnership with OpenAI to integrate ChatGPT on its devices and through its voice assistant Siri. As part of the deal, Apple was previously in discussions to gain an observer role on OpenAI’s board, although those plans were abandoned, people familiar with the matter told Bloomberg.
Part of the funding round was invested through so-called special purpose vehicles, in which backers can pool money from a wider range of investors to buy a portion of the shares. For example, in addition to bringing in its own capital, Thrive created an SPV to invest in the company, one person said. OpenAI declined to comment on SPVs.
The funding deal follows a turbulent year for OpenAI. Last November, the company’s board fired and then quickly rehired CEO Sam Altman. Over the next few months, the company reshuffled its board, hired hundreds of new employees and lost several key executives, including co-founder Ilya Sutskever and chief technology officer Mira Murati.
At the same time, OpenAI plans to move from its nonprofit structure — an unusual organization that has frustrated investors — to a for-profit model. The move would appease the company’s backers, but could pose legal hurdles. As part of a transition, OpenAI has discussed giving Altman equity in the company – a stake that could be worth more than $10 billion, although OpenAI’s board has said that he had not discussed specific figures.
OpenAI kicked off a Silicon Valley obsession with the potential of AI by launching its chatbot, ChatGPT, in 2022. The tool can generate human-sounding answers to questions and has amassed 250 million weekly active users, a the company said. Its paid service, ChatGPT Plus, has 11 million subscribers, one person said. And its business-focused service has more than 1 million users, as Bloomberg previously reported.
A series of new companies have emerged to compete with OpenAI in recent years, several of which were founded by former OpenAI employees, such as Anthropic and Safe Superintelligence. OpenAI also faces intense competition from large technology companies with vast resources, including Google and Amazon.com Inc., which are also developing their own AI models.
In this funding round, OpenAI discouraged investors from backing competing companies, such as 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 backed Safe Superintelligence, would not participate in the new fundraising.
–With help from Lizette Chapman.
(Adds investment details from Coatue and Quiet Capital in fifth paragraph.)
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