OpenAI closes $300M share sale at $27B-29B valuation

Updated to note that Microsoft’s investment closed in January. The VC money reported here, which is part of a public offering, is separate.

OpenAI, the startup behind the widely used conversational AI model ChatGPT, has secured new backers, TechCrunch has learned.

Venture capital firms including Tiger Global, Sequoia Capital, Andreessen Horowitz, Thrive and K2 Global raising new shares, according to documents seen by TechCrunch. A source tells us Founders Fund is also investing. In total, VCs have invested just over $300 million at a valuation of $27 billion – $29 billion. This is separate from a large Microsoft investment announced earlier this year, a person familiar with the development told TechCrunch, which closed in January. The size of Microsoft’s investment is believed to be around $10 billion, a figure we confirmed with our source.

If all of this is true, this is the close of the public offering that the Wall Street Journal reported was in the works in January. We confirmed that this is when the discussions began, amid a viral surge of interest in OpenAI and its business.

We’ve reached out to the investors mentioned here, as well as OpenAI, for comment and will update this story as we learn more. OpenAI declined to comment on the public offering, which is separate from the Microsoft investment that closed in January.

While Microsoft’s investment has a strong strategic angle (the tech giant is working to integrate OpenAI’s technology into various areas of its business), VCs are stepping in as financial backers.

As far as we understand, the term sheets have been signed by the investors and the money has been transferred; the OpenAI countersignature is still to come. The plan was to make this investment public next week.

In total, outside investors now own more than 30 percent of OpenAI, the source said.

According to PitchBook data, Peter Thiel appears to have been a backer before, but this appears to be the first time Founders Fund will be investing; K2 Global, a company with one partner, Ozi Amanat, and Thrive are also early backers of the startup. Based on PitchBook data, Sequoia, A16Z and Tiger Global appear to have been previous investors in the company.

Several companies, including Tiger and Sequoia, have taken a few hits as a result of the financial crisis that has hit the tech sector over the past year; in general, a number of VCs have massively slowed their investment pace, sitting on so-called “dry dust” waiting for better weather and perhaps better opportunities.

So at a time when investors are on the hunt for interesting new AI startups, OpenAI is likely to be considered the kind of opportunity that looks good right now.

“They are probably trying to use this [funding] to say hello, look, we found a golden apple,” one source said of the decision to support OpenAI here and now. “Venture is a very strange place where anything can happen. You can go from big to big again, at any time.”

OpenAI has an army of technical teams working in various areas, but the area that has gotten a lot of attention lately is GPT, short for Generative Pre-trained Transformer, which is OpenAI’s family of large language models used by third parties way of the APIs.

There’s also ChatGPT, the generative AI service that OpenAI launched in late November 2022 based on GPT that allows anyone to type a natural question and get a convincing and detailed answer. ChatGPT has been a certifiable success, with more than a billion visitors to its website in February, SimilarWeb says, and that doesn’t include those using the technology through third parties.

Generative AI is all the rage right now, but OpenAI also has its controversies, with many centering on this lively, consumer-facing ChatGPT product. People have questioned whether it lies, whether it is a “virus”, how it handles privacy, whether it can be manipulated to be toxic or defamatory; and in the wake of so many others rushing into AI development, even the very nature of how “open” the GPT brand of OpenAI will be in the long run has been disputed.

To be fair, OpenAI has acknowledged the work that still needs to be done, and in the meantime has continued to develop services and iterate. In February, the startup introduced a paid version of ChatGPT, called ChatGPT Plus, with a faster user experience. Updated with multimodal LLM GPT-4 in March.

The key to the proposal, OpenAI’s valuation, and likely investor interest is that alongside the technology, there is also a rapidly developing ecosystem around that technology.

In addition to the hundreds of millions of people who have played with ChatGPT, hundreds of companies large and small have begun implementing GPT and ChatGPT into their products and services. This has also been an impetus for other big tech companies to accelerate the deployment of their own generative AI efforts. Google has launched Bard and Meta also introduced LLaMA to take on GPT with its proprietary LLM.

OpenAI, however, has undeniable gravitas amid the competition, not least because of its singular focus on the AI ​​space since its founding in 2015. This has been even as it has gone through some significant changes, including the of its original non-profit model. . we don’t really whether AI will precipitate the seismic shift that many say it will, but as one person said: OpenAI may be the closest thing we have to a winner in the space right now.

“We’ve been working on it for so long, but it’s with a gradually increasing confidence that it will actually work,” co-founder and CEO Sam Altman said at an AI conference earlier this month. “We have been [building] the company for seven years. These things take a long, long time. I would generally say in terms of why it worked when others haven’t: it’s just because we’ve been in the grind for a long time sweating every detail. And most people aren’t willing to do that.”

In addition to ChatGPT, OpenAI has its AI-based image generation tool called Dall-E which received a significant update in July last year. It also has the Whisper AI voice recognition model.

Microsoft’s efforts have included integrating OpenAI APIs with its Azure infrastructure to support the computational requirements of the models. Also in March it announced a GPT-4 integration to augment Bing, part of Microsoft’s long-standing efforts to reduce the dominance of Google’s search services.

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OpenAI, the artificial intelligence research lab, is making headlines as it closes its latest $300 million investment round, giving it a valuation of $27 billion to $29 billion. This makes OpenAI the tenth most valuable venture-backed company globally. Investors include Alphabet, Microsoft, Sony and others.

Ikaroa, a full-stack technology company, is proud to be part of this major shift in AI. At Ikaroa we believe that AI is transforming the way companies operate and that OpenAI is leading the way. We are excited to see the resources they are providing and are sure they will continue to push the boundaries of what is possible with AI technology.

OpenAI’s mission of “democratizing AI and benefiting humanity” resonates strongly with Ikaroa. We are proud to have a connection to the OpenAI team and their ambitious mission to make the technology available more widely. We believe that their efforts are making a real difference in the way AI and other technologies are used.

OpenAI’s big-name backers and $27 billion to $29 billion valuation also shows the trust that investors have put in the team’s work. We hope this will be part of a larger trend and that more companies will appreciate the value of AI technology, leading to more investments in AI startups and development.

At Ikaroa we strive to continue to contribute to the development of AI and other technologies. We are excited to see OpenAI close its big-ticket share sale, and we are sure that it ushers in a new era for artificial intelligence.


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