Numerous media outlets had reported that OpenAI was in talks for a fundraising that would value it at more than $100 billion, which the start-up confirmed in a statement on Wednesday. It announced that it had raised $6.6 billion, which in fact valued it at $157 billion. On Thursday, it announced that it had established a new $4 billion credit facility with several major banks, which will give it access to more than $10 billion in liquidity.
The start-up, which now boasts more than a million paying users and more than 250 million weekly ChatGPT users, has once again attracted investors. The funding round was led by venture capital firm Thrive Capital which invested $1.3 billion, Microsoft, OpenAI’s main investor, contributed $750 million. Other investors include Nvidia, Softbank, Khosla Ventures, Altimeter Capital, Fidelity, Tiger Global and MGX.
OpenAI assures in its press release:
“The new funding will allow us to strengthen our leadership in cutting-edge AI research, increase our computing capacity, and continue creating tools that help people solve difficult problems.”
OpenAI began as a non-profit organization when it was established in 2015. However, in 2019 it restructured its operations and became a limited for-profit organization, while retaining a non-profit entity that oversees its activities , “OpenAI Inc.”
This hybrid model allows OpenAI to raise funds from investors while respecting its founding principles of developing artificial general intelligence (AGI or AGI) beneficial to humanity. Investors have a capped return, meaning they cannot receive an unlimited return on their investments, with any excess going back to the non-profit entity, in order to maintain the long-term mission objective.
A model which could be subject to change since, according to Reuters, the investors negotiated conditions which would allow them to recover their capital or renegotiate the valuation: the financing was carried out in the form of convertible notes, with a conversion into shares conditional on a successful structural change to a for-profit entity, no longer under the control of the nonprofit’s board of directors, as well as the removal of the cap on returns for investors.
The start-up, which has experienced numerous twists and turns, complaints and departures of managers since last November, quickly faced fierce competition. The dazzling success of ChatGPT has not been denied, quite the contrary. The free version continues to cause it to lose significant amounts of money, as does the development of its new models. AI models such as GPT consume a considerable amount of energy and require specialized servers to process queries in real time.
These financial losses are partly offset by its three flagship products: ChatGPT Enterprise (launched in August 2023), Team (January 2024) and it expects a turnover of around $3.7 billion for 2024.
OpenAI CFO Sarah Friar, discussing the $4 billion fundraising and credit facility with JPMorgan Chase, Citi, Goldman Sachs, Morgan Stanley, Santander, Wells Fargo, SMBC, UBS and HSBC, says:
“This credit facility further strengthens our balance sheet and provides us with the flexibility to seize future growth opportunities. We are proud to have the strongest banks and investors in the world supporting us”.
