OpenAI Raises $6.6 Billion in Funding

By Krystal Hu

(Reuters) – OpenAI, the company behind ChatGPT, has raised $6.6 billion from investors, potentially valuing the company at $157 billion and solidifying its status as one of the most valuable private entities globally.

The funding attracted both returning venture capitalists, such as Thrive Capital and Khosla Ventures, and Microsoft, OpenAI’s largest corporate backer. Notably, Nvidia also joined this funding round.

The closing of the funds coincides with ongoing restructuring efforts and executive changes, including the recent unexpected departure of longtime Chief Technology Officer Mira Murati.

Altimeter Capital, Fidelity, SoftBank, and Abu Dhabi’s state-backed investment firm MGX also participated in this funding round.

OpenAI Chief Financial Officer Sarah Friar informed employees that the company plans to provide liquidity through a tender offer to buy back employee shares, though specifics and timing are not yet finalized. Earlier this year, some employees were allowed to cash out shares at an $86 billion valuation.

Thrive Capital, which committed around $1.2 billion, negotiated the option to invest an additional $1 billion next year if revenue targets are met.

Apple, initially in discussions to invest in OpenAI, ultimately did not join this funding round.

The funding consisted of convertible notes, with conversion depending on a successful structural change to a for-profit model that would eliminate control by the non-profit board.

Investor enthusiasm remains high despite personnel changes. OpenAI CEO Sam Altman projects significant growth, with revenue expected to hit $3.6 billion this year, despite losses exceeding $5 billion. The company forecasts revenue will jump to $11.6 billion next year.

Investors have secured protections during the corporate restructuring that is intended to grant equity to Altman. Negotiations are ongoing.

Terms have been set to allow investors to recover their capital or renegotiate valuation if changes are not implemented within two years.

OpenAI’s remarkable rise in product popularity and valuation has captured global attention; since launching ChatGPT, it has gained 250 million weekly active users. The company’s valuation soared from $14 billion in 2021 to $157 billion, with revenues jumping from zero to $3.6 billion, significantly exceeding prior projections.

The company continues to strive toward achieving artificial general intelligence (AGI) as it ramps up its commercialization efforts and aims for profitability.