OpenAI Eyes $100 Billion Valuation with Major New Funding Round Led by Thrive Capital
Saturday, Aug 31, 2024 1:00 am ET
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OpenAI is reportedly in talks for a new multi-billion dollar funding round, potentially pushing its valuation past $100 billion. Leading the round is Thrive Capital, expected to invest approximately $1 billion, with additional contributions anticipated from Microsoft. If successful, this would be the largest capital injection OpenAI has received since Microsoft's $10 billion investment in January 2023. OpenAI's valuation stood at $86 billion when employees sold existing shares in late 2022.
The company has seen a dramatic rise in its annual recurring revenue, projected to hit $3.4 billion by 2024, up from $28 million in 2022, thanks largely to subscriptions for various versions of ChatGPT and developer API services. Nevertheless, high operational costs, expected to total $8.5 billion in 2024, continue to exceed revenue growth, keeping the company in a loss-making position.
Previous funding rounds have brought in $13.5 billion, with Microsoft contributing $13 billion since 2019 and owning 49% of OpenAI's shares. Much of the funds are channeled towards meeting computing power demands, as AI models require extensive computational resources. This includes procuring high-performance computing devices, server clusters, and building advanced data centers, often leveraging Microsoft's infrastructure.
OpenAI is also in discussions with companies like Broadcom to develop proprietary AI chips, which could enhance training and operational efficiency while reducing costs. Such developments reaffirm OpenAI's need for substantial capital.
The firm's next major milestone is the anticipated release of GPT-5 in late 2025 or early 2026, expected to offer significant advancements in multi-modal understanding and long-form reasoning tasks. CEO Sam Altman promises a leap in performance akin to the jump from GPT-3 to GPT-4.
Sources indicate that OpenAI is exploring restructuring to become more investor-friendly, potentially removing the current profit cap on its for-profit subsidiary. At present, the complex structure includes both non-profit and for-profit entities, controlled by a non-profit board focused on human benefit rather than investor profits. Discussions revolve around simplifying this structure to attract more traditional investment models.
The interest extends to heavyweight tech companies like NVIDIA and Apple, alongside existing partner Microsoft. If NVIDIA and Apple join, OpenAI could secure a support base comprising three of the world's most valuable tech companies. This round of financing would establish OpenAI as one of Silicon Valley's most valuable startups, surpassing even Stripe’s $95 billion valuation from 2021.
OpenAI's ongoing discussions include pivotal changes in company structure, expected to make it more appealing to investors. While no decisions have been finalized, simplifying the non-profit framework could potentially lift restrictions on profit-sharing for investors.
Amid these developments, Elon Musk has criticized OpenAI for deviating from its original non-profit mission, emphasizing a potential conflict between profit-oriented growth and the foundational aim of widespread human benefit. OpenAI maintains that its non-profit ethos remains core, despite any structural adjustments.
The company has seen a dramatic rise in its annual recurring revenue, projected to hit $3.4 billion by 2024, up from $28 million in 2022, thanks largely to subscriptions for various versions of ChatGPT and developer API services. Nevertheless, high operational costs, expected to total $8.5 billion in 2024, continue to exceed revenue growth, keeping the company in a loss-making position.
Previous funding rounds have brought in $13.5 billion, with Microsoft contributing $13 billion since 2019 and owning 49% of OpenAI's shares. Much of the funds are channeled towards meeting computing power demands, as AI models require extensive computational resources. This includes procuring high-performance computing devices, server clusters, and building advanced data centers, often leveraging Microsoft's infrastructure.
OpenAI is also in discussions with companies like Broadcom to develop proprietary AI chips, which could enhance training and operational efficiency while reducing costs. Such developments reaffirm OpenAI's need for substantial capital.
The firm's next major milestone is the anticipated release of GPT-5 in late 2025 or early 2026, expected to offer significant advancements in multi-modal understanding and long-form reasoning tasks. CEO Sam Altman promises a leap in performance akin to the jump from GPT-3 to GPT-4.
Sources indicate that OpenAI is exploring restructuring to become more investor-friendly, potentially removing the current profit cap on its for-profit subsidiary. At present, the complex structure includes both non-profit and for-profit entities, controlled by a non-profit board focused on human benefit rather than investor profits. Discussions revolve around simplifying this structure to attract more traditional investment models.
The interest extends to heavyweight tech companies like NVIDIA and Apple, alongside existing partner Microsoft. If NVIDIA and Apple join, OpenAI could secure a support base comprising three of the world's most valuable tech companies. This round of financing would establish OpenAI as one of Silicon Valley's most valuable startups, surpassing even Stripe’s $95 billion valuation from 2021.
OpenAI's ongoing discussions include pivotal changes in company structure, expected to make it more appealing to investors. While no decisions have been finalized, simplifying the non-profit framework could potentially lift restrictions on profit-sharing for investors.
Amid these developments, Elon Musk has criticized OpenAI for deviating from its original non-profit mission, emphasizing a potential conflict between profit-oriented growth and the foundational aim of widespread human benefit. OpenAI maintains that its non-profit ethos remains core, despite any structural adjustments.