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OpenAI, the company behind the groundbreaking language model ChatGPT, has secured a massive $6.6 billion funding round, propelling its valuation to a staggering $157 billion. This funding round marks a significant milestone for the company, putting it on par with prominent publicly traded entities like Goldman Sachs, Uber, and AT&T in terms of market capitalization. The fundraising process, which involved negotiations with numerous tech giants and international investors, was marked by intense scrutiny due to internal turmoil within OpenAI.
The new valuation represents nearly double OpenAI's previous valuation of $86 billion, which was established earlier this year when employees sold existing shares. Notably, the investors in this latest round will have the right to withdraw their investments if OpenAI fails to complete its planned conversion to a for-profit company. Currently, OpenAI operates as a charitable nonprofit with a for-profit division that allows investors to acquire a stake in its future earnings.
Thrive Capital, a venture capital firm, led the funding round with a substantial investment of $1.25 billion. Microsoft, a long-standing supporter of OpenAI, contributed slightly less than a billion dollars. The round also attracted new investors, including the Tokyo-based conglomerate SoftBank, which invested around $500 million, and the AI chip maker Nvidia, which contributed approximately $100 million. Other investors included Khosla Ventures, Altimeter Capital, Fidelity Management and Research Company, and MGX, a UAE-backed company established this year to invest in AI ventures. Investors were required to commit at least $250 million to access OpenAI's financial documents for review.
While Apple had engaged in discussions to invest in OpenAI, those talks ultimately fell apart, as reported by The Wall Street Journal. This missed opportunity would have marked a rare strategic investment for the iPhone maker, which is already collaborating with OpenAI on its new Apple Intelligence product.
OpenAI is currently the most prominent player in the rapidly evolving AI landscape. ChatGPT has amassed a remarkable 250 million weekly active users and boasts 11 million paying subscribers. Moreover, around one million businesses rely on its technology. However, fierce competition from tech giants like Meta and Google, as well as emerging startups like Anthropic, poses a significant challenge. These rivals have recently unveiled advanced artificial intelligence models with capabilities comparable to OpenAI's offerings, making it crucial for the creators of ChatGPT to secure additional funding.
OpenAI has been aggressively launching new products for both consumers and businesses throughout the year. The company has also expanded its workforce beyond a primarily research-oriented team by incorporating individuals with business experience. Notably, OpenAI recently appointed its first chief financial officer, Sarah Friar, who played a pivotal role in leading the fundraising process. This shift, coupled with personal disputes among OpenAI executives, has created significant tensions within the company. Many early employees express concern that the pursuit of money and fame has diverted OpenAI from its initial mission to develop AI for the public good. Others within the organization believe that generating revenue is necessary to fund further research and make AI accessible to the public, ultimately benefiting society.
Source: OpenAI nearly doubles valuation to $157 billion in funding round