OpenAI, the company behind ChatGPT, has raised $6.6 billion in a new funding round, boosting its post-money valuation to $157 billion. The milestone positions OpenAI as one of the most highly-valued private companies globally.
OpenAI’s rapid growth, in product popularity and valuation, has drawn worldwide attention. Since the launch of ChatGPT, the platform has garnered 250 million active users weekly.
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The company’s valuation has surged from $14 billion in 2021 to $157 billion, while its revenue soared to $3.6 billion, exceeding initial expectations. According to Bloomberg, investors in the new funding round have the option to recover their investment if OpenAI doesn’t complete its transition to a for-profit model within the next two years.
Key investors in this round
Led by Thrive Capital’s Josh Kushner, the funding round saw participation from Khosla Ventures, Altimeter Capital, and Fidelity Management & Research. Microsoft, having already committed $13 billion to OpenAI, and Nvidia, whose processors play a key role in AI development, were among the standout investors. Additional participation came from global investors such as SoftBank and Abu Dhabi’s new tech investment firm, MGX.
Apple’s absence from the round
Apple Inc, despite earlier talks, did not participate in this round. The tech giant has an ongoing partnership with OpenAI to incorporate ChatGPT into its products and Siri, but discussions about Apple gaining a board observer seat fell through.
Funding amid leadership changes
This investment comes amid substantial internal transformations at OpenAI. Several key executives, including Chief Technology Officer Mira Murati, Chief Research Officer Bob McGrew, and Vice-President of Research Barret Zoph, have left the organisation. Of the original 13 founders, only three remain.
The funding was secured through convertible notes associated with OpenAI’s transition to a for-profit model, which will transfer oversight from the non-profit board and remove restrictions on investor returns.
Despite the leadership departures, investor confidence remains high. CEO Sam Altman and CFO Sarah Friar have projected strong revenue growth, with OpenAI expected to generate $3.6 billion in revenue this year despite substantial losses and a projected leap to $11.6 billion next year.
Investors have also secured safeguards in the event OpenAI’s restructuring plans are not completed, which include equity allocations to Altman. If changes are not finalised within two years, investors have the right to recover their capital or renegotiate the valuation terms.
[With agency inputs]
First Published: Oct 03 2024 | 12:29 PM IST