New York: OpenAI, the developer behind ChatGPT, has successfully raised $6.6 billion in funding, potentially valuing the company at an impressive $157 billion and solidifying its status as one of the most valuable private enterprises globally. This funding round has seen participation from returning venture capitalists like Thrive Capital and Khosla Ventures, as well as significant backing from OpenAI’s largest corporate investor, Microsoft, and new involvement from Nvidia.
This funding announcement coincides with OpenAI’s ongoing restructuring efforts and recent executive changes, notably the unexpected departure of Chief Technology Officer Mira Murati last week. Other notable participants in this funding round include Altimeter Capital, Fidelity, SoftBank, and Abu Dhabi’s state-backed investment firm MGX.
According to OpenAI Chief Financial Officer Sarah Friar, the company will soon provide liquidity options to employees through a tender offer to buy back their shares, although specifics regarding the timing have yet to be determined. Earlier this year, the firm allowed some employees to cash out their shares at a valuation of $86 billion.
Thrive Capital committed around $1.2 billion through its own fund and a special purpose vehicle for smaller investors, negotiating an option to invest an additional $1 billion next year, contingent on OpenAI achieving a revenue goal. Although Apple was in talks to invest in OpenAI, it ultimately did not participate in this funding round, as sources familiar with the discussions have indicated.
The funding has been structured as convertible notes, with the conversion to equity dependent on OpenAI successfully transitioning to a for-profit model, which would no longer be under the governance of a non-profit board, along with the removal of the cap on investor returns.
Despite the recent personnel changes, investor enthusiasm remains high, fueled by projections from OpenAI CEO Sam Altman. The company is on track to generate $3.6 billion in revenue this year, albeit with losses exceeding $5 billion. Looking ahead, it anticipates a significant revenue surge to $11.6 billion in the coming year, according to sources close to the figures.
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Investors have secured protections during OpenAI’s complex corporate restructuring that would enable Altman to receive equity. Ongoing discussions are underway, but no specific timeline has been set. Terms have been negotiated that would allow investors to recoup their capital or renegotiate the valuation if the changes are not executed within two years.
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OpenAI’s rapid ascent in product popularity and valuation has captivated global attention. Since the launch of ChatGPT, the company has garnered 250 million weekly active users. Its valuation skyrocketed from $14 billion in 2021 to $157 billion as it increased its revenue from zero to $3.6 billion, far surpassing Altman’s initial projections. OpenAI has reassured investors that it continues to pursue artificial general intelligence (AGI), focusing on developing AI systems that exceed human intelligence while ramping up commercialization efforts to achieve profitability.
