Even after Microsoft heavily invested in OpenAI, the company has still attracted new investors who have raised $300 million for the most popular generative AI firm, putting its valuation at around $29 Billion.
This investment was made by a list of Venture Capital(VC) firms that bought shares in the AI tech company. The VCs include Tiger Global, Sequoia Capital, Andreessen Horowitz, Thrive, and K2 Global.
OpenAI Continues to Attract Investors
Earlier in January, OpenAI disclosed it had received funding from Microsoft. However, the particular financial details of the agreement were not disclosed by either company. According to media estimates, Microsoft spent $10 billion on the startup in an investment that involved more than just money. Prior to this, Microsoft had already committed more than $3 billion to OpenAI.
In January, the Wall Street Journal (WSJ) reported that OpenAI was in talks to sell existing shares in a tender offer that would value the company at around $29 billion. At the time, the VCs showing interest in the $300 million share sales tender were Founders Fund and Thrive Capital.
The surfacing of information about this recent investment, therefore, confirms the WSJ claims to be true. Important to note is that OpenAI is not a publicly traded company, but many of the shares could be purchased from shareholders like employees.
However, unlike Microsoft’s investment which was strategic seeing as the tech giant is seeking to integrate OpenAI’s technology across a variety of aspects of its business, the VCs are financial backers hence they are only investing money.
The investment, which will officially be made public next week, is in its final stages since investors already signed the documents and transferred the money to OpenAI. According to sources, the parties are just waiting for OpenAI to countersign, sealing the agreement.
The source further revealed that as of now, external investors own more than 30% of the company. This is because the company also made a tender offer for shares in 2021, which valued the company at $14 billion at that time.
While Sequoia, A16Z, and Tiger Global may have invested in the business earlier, according to PitchBook statistics, Founders Fund, K2 Global, a company with just one partner named Ozi Amanat, and Thrive are new investors in OpenAI.
Venture Capitals such as Tiger and Sequoia have suffered hits due to the ongoing financial crisis in the tech industry since last year. As a result, most VCs have significantly slowed down their investing pace, sitting on so-called “dry powder” in anticipation of a better environment and perhaps better opportunities.
So, at a time when investors are looking for intriguing AI startups to support, OpenAI is probably seen as the kind of opportunity that looks good right now. Additionally, investors are increasingly interested in OpenAI due to its valuation as well as the fact that there is not only the technology but also a quickly growing ecosystem built around it.
Leading in AI Advancement
OpenAI has been instrumental in the development and advancement of generative AI especially after the release of ChatGPT.
Aside from the millions of users who have experimented with ChatGPT and hundreds of big and small businesses have begun integrating GPT and ChatGPT into their goods and services, the chatbot has also encouraged other major tech companies to launch their own generative AI projects more quickly. As a result, Meta introduced LLaMA while Google launched Bard to compete with GPT.
But OpenAI stands out from the competition, in part because it has, since its founding in 2015, devoted its entire attention to the field of artificial intelligence. Even though it underwent some substantial changes, such as abandoning its initial non-profit model, this continued to remain the case.
“We’ve been working on it for so long, but it’s with gradually increasing confidence that it’s really going to work,” said Sam Altman, co-founder and CEO of OpenAI.“We’ve been [building] the company for seven years. These things take a long, long time. I would say by and large in terms of why it worked when others haven’t: It’s just because we’ve been on the grind sweating every detail for a long time. And most people aren’t willing to do that,” he added.
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This article was written for Business 2 Community by John Isige.
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