OpenAI closes $6.6 billion Funding haul with Investment from Microsoft and Nvidia – Fintech News Europe

0

OpenAI Secures $6.6 Billion in Funding, Valuing the Company at $157 Billion Amid Leadership Changes

October 3, 2024OpenAI, the creator of the popular AI tool ChatGPT, has raised $6.6 billion in a recent funding round, which could value the company at a staggering $157 billion. This latest capital injection cements its position as one of the world’s most valuable private companies and reflects investor confidence in the company’s future growth prospects.

Returning venture capital firms, including Thrive Capital and Khosla Ventures, alongside corporate backer Microsoft, participated in the funding round. The round also attracted new investors like Nvidia, Altimeter Capital, Fidelity, SoftBank, and Abu Dhabi’s state-backed investment firm MGX.

The funding coincides with OpenAI’s ongoing restructuring efforts, following the recent departure of its longtime Chief Technology Officer, Mira Murati. Two other senior research executives have also left the company. Despite the leadership changes, investor enthusiasm remains strong, buoyed by the company’s projected growth and its pursuit of artificial general intelligence (AGI), which aims to develop AI systems that surpass human intelligence.

Chief Financial Officer Sarah Friar informed employees that OpenAI will provide liquidity through a tender offer to buy back their shares following the latest funding round, though details and timing have not yet been finalized. Earlier this year, employees were able to cash out shares at a valuation of $86 billion.

Thrive Capital, a key player in the funding, committed $1.2 billion and negotiated an option to invest an additional $1 billion next year if OpenAI meets specific revenue goals. Sources say Apple had been in talks to invest but ultimately did not participate in this round.

The funding was raised through convertible notes, with conversion to equity dependent on OpenAI’s successful transition to a for-profit structure. This change would see the removal of a return cap for investors and would end the company’s control by its non-profit board. Investors have also negotiated terms that allow them to claw back capital or renegotiate valuation terms if these structural changes are not implemented within two years.

OpenAI’s CEO Sam Altman projects a major revenue jump next year, expecting to generate $11.6 billion, up from an anticipated $3.6 billion this year. Despite this rapid revenue growth, the company is on track to record mounting losses of over $5 billion in 2024. OpenAI’s user base has grown exponentially, with ChatGPT now boasting 250 million weekly active users.

As OpenAI continues its push toward commercialization and profitability, it remains committed to its long-term goal of developing AGI. Investors, while aware of the risks and uncertainties, are betting big on the company’s ability to revolutionize the AI landscape and deliver significant returns.

About OpenAI:

Founded with the mission to ensure AI benefits all of humanity, OpenAI’s meteoric rise has captured global attention. Since its 2021 valuation of $14 billion, the company’s growth has been extraordinary, driven by the immense popularity of its products, including ChatGPT.

Leave a Reply

Your email address will not be published. Required fields are marked *