The ChatGPT chatbot’s developer, OpenAI, reportedly completed a $300 million share sale at a $27 billion to $29 billion value.
Venture Capital companies including Tiger Global, Sequoia Capital, Andreessen Horowitz, Thrive, and K2 Global are reportedly buying fresh shares, according to papers reviewed by TechCrunch. We have learned from a source that the Founders Fund is also investing. At a valuation of $27–$29 billion, the total investment from VCs is just over $300 million. A source familiar with the situation tells TechCrunch that this is distinct from a sizable investment from Microsoft that was revealed earlier this year and completed in January. As we confirmed with our source, Microsoft is reportedly investing something in the neighborhood of $10 billion.
If everything said above is true, then this marks the completion of the tender bid that the Wall Street Journal claimed was in the works in January. We were able to confirm that negotiations began then, in the midst of a viral upsurge in interest in OpenAI and its venture.
We have asked the listed investors and OpenAI for comments and will update this article when additional information becomes available. Separate from the Microsoft investment that closed in January, OpenAI declined to comment on the tender offer.
The VCs are coming in as financial backers, but Microsoft’s investment has a strong strategic component the IT giant is seeking to integrate OpenAI’s technology across a variety of aspects of its company.
According to our understanding, the investors have signed the term sheets and the money has been sent; only OpenAI needs to provide a countersignature. The investment was supposed to go public the next week.
Over 30% of OpenAI is now owned by outside investors as a whole, the source claimed.
According to PitchBook statistics, it appears that Peter Thiel was a previous investor, but it appears that this will be the first investment by Founders Fund. K2 Global, a company with just one partner named Ozi Amanat, and Thrive are also new investors in the venture. Sequoia, A16Z, and Tiger Global appear to have invested in the business previously, according to PitchBook statistics.
In general, many VCs have significantly slowed down their investing pace, sitting on so-called “dry powder” in anticipation of a better environment and perhaps better opportunities. A number of firms, including Tiger and Sequoia, have taken some hits as a result of the financial crisis the tech sector has seen in the past year.
Therefore, OpenAI is probably seen as the kind of opportunity that looks good right now at a time when investors are looking for interesting AI startups to back.
Although generative AI is currently very popular, OpenAI is also the subject of some heated debates, many of which center on its popular ChatGPT product for consumers. People have questioned whether it is lying, whether it is a “virus,” how it handles privacy, and whether it can be manipulated to be toxic or commit libel. In the wake of so many more people rushing into AI development, even the very nature of how “open” OpenAI’s GPT branding will be in the long run has come up for discussion.
The fact that there is an ecosystem rapidly growing around the technology is essential to the argument, OpenAI’s value, and investors’ potential interest.
In addition to the hundreds of millions of users who have experimented with ChatGPT, a huge number of companies, both big and small, have begun integrating GPT and ChatGPT into their goods and services. That has also given other major tech companies encouragement to launch their own generative AI projects faster. In order to compete with GPT with its own LLM, Google created Bard, while Meta also unveiled LLaMA.
Sam Altman, co-founder, and CEO, remarked at an AI conference earlier this month, “We’ve been working on it for so long, but it’s with gradually growing confidence that it’s actually going to work.” We’ve spent the last seven years developing the business. These processes take a very, very long time. In general, I’d say that the reason it succeeded when others have failed is simply that we’ve been working hard and sweating every last detail for a very long time. And the majority of people aren’t eager to comply.
Along with ChatGPT, OpenAI also offers Dall-E, an AI-based image-generation tool that underwent a significant update in July of last year. Whisper AI, a voice recognition model, is also included.
Microsoft has worked to support the computing needs of the models by integrating OpenAI’s APIs with its Azure infrastructure. A GPT-4 integration to boost Bing was also revealed in March as part of Microsoft’s ongoing efforts to challenge Google’s search service supremacy.
