ChatGPT maker OpenAI has closed its largest VC round in history.
The startup announced today that it has raised $6.6 billion in a funding round that values OpenAI at $157 billion pre-money. The new cash, led by previous investor Thrive Capital, brings OpenAI's total funding to approximately $17.8 billion, according to Crunchbase.
“The new funding will allow us to double down on our leadership in frontier AI research, increase our computing power, and continue to build tools that help people solve tough problems,” the company said in a blog post. said. “We are grateful to our investors for placing their trust in us and will continue to work with our partners, developers and the broader community to build an AI-powered ecosystem and a future that benefits everyone. I’m looking forward to shaping it.”
OpenAI was already the most funded AI startup in the world. But this huge new venture puts the San Francisco company in a category of its own.
Elon Musk's AI startup xAI raised more than $6 billion earlier this year, but its valuation was dwarfed by OpenAI's valuation ($24 billion post-money). OpenAI's biggest rival, Anthropic, has raised just over half of OpenAI's total funding since its founding ($9.7 billion), while high-profile AI ventures Cohere and Mistral have raised around $1 billion. It continues to be .
So why did OpenAI need to raise more money than the Zimbabwean government spent in 2021? Well, quite simply, to sustain its vast operations. OpenAI is reportedly spending billions in training to commercialize its AI systems (such as the recently debuted o1) and hiring coveted data science talent to stay ahead of the competition.
According to The Information, OpenAI spent about $7 billion on model training and $1.5 billion on staffing. (OpenAI CEO Sam Altman said that training GPT-4, one of the company's flagship models, cost more than $100 million.) And at one point, ChatGPT alone was enough to run OpenAI. It is said to have cost $700,000 per day.
OpenAI is by far the market leader in generative AI. ChatGPT has more than 250 million weekly active users (about 10 million of whom are paid members), and OpenAI reportedly generated more than $3.4 billion in annual revenue. ChatGPT alone could bring in $2.7 billion in revenue this year, the New York Times reported, citing internal OpenAI documents.
Microsoft, a close partner and investor in OpenAI (investing more than $13 billion), has built an entire suite of productivity products based on OpenAI models. And Apple is integrating ChatGPT with the Apple Intelligence collection of AI technologies.
OpenAI optimistically predicts its revenue will reach $100 billion in 2029, which is comparable to Nestlé's current annual sales. However, it faces competition on many fronts.
Startups like Runway and Luma Labs have entered the market by beating OpenAI with high-fidelity video generation models. (OpenAI's own video model, Sora, is expected to launch sometime this fall.) Anthropic continues to build a suite of AI products to rival ChatGPT. xAI, Google, and Amazon are investing heavily in infrastructure to train powerful next-generation models, and Meta is working with startups like Black Forest Labs to reduce the commoditization of AI that generates text and images. We continue to release open models with this goal in mind.
Competitive pressures are so great that OpenAI may significantly increase the price of its premium ChatGPT plan, ChatGPT Plus, from $20 per month to $44 per month by 2029, and revamp its corporate structure to attract additional investment. There is a gender.
OpenAI's commercial arm is currently controlled by a nonprofit organization that places limits on investor returns. However, Altman is said to have indicated that OpenAI will move away from nonprofit governance in the coming months. Reuters previously reported that whether the $6.6 billion round actually closes depends on it, and that Altman could receive a stake.
Investors in the new round will be able to get their money back if OpenAI doesn't complete its transformation from nonprofit to for-profit within two years, according to Bloomberg.
Without constraints on its ability to raise capital, OpenAI could be freer to consider capital-intensive, long-term investments, such as AI chips or entire data centers, to reduce its dependence on Nvidia. . (NVIDIA makes the hardware on which OpenAI trains and runs many of its models.) It also replenishes the company's funds to sign licensing deals with data providers such as Reddit and Condé Nast. I plan to. The deal could give OpenAI a competitive edge. At the same time, it protects you from intellectual property lawsuits.
Whether it can be done is another question. OpenAI has fired high-profile executives in recent weeks, culminating in disagreements over the company's direction.
CTO Mila Murati, chief research officer Bob McGrew, and vice president of research Barrett Zoff announced their resignations at the end of September. Prominent research scientist Andrei Karpathy left OpenAI in February, Satskeva and former safety leader Jan Reike announced their departure in May, and co-founder John Schulman left OpenAI last month. He announced that he would be resigning to join Anthropic. Meanwhile, OpenAI President Greg Brockman is on sabbatical until the end of the year.
Of the 13 people who helped found OpenAI in 2015, only three remain today.