AI startup OpenAI’s new funding round could value the AI startup at $150 billion, contingent on significant corporate changes.
What Happened: OpenAI’s upcoming financing round is expected to involve convertible notes. The valuation of $150 billion will depend on whether OpenAI can alter its corporate structure and eliminate a profit cap for investors, reported Reuters, citing sources familiar with the matter.
The $6.5 billion funding details, not previously disclosed, highlight OpenAI’s shift from a research-based non-profit to a more investment-attractive entity. This change aims to support its pursuit of artificial general intelligence (AGI), AI surpassing human intelligence.
Investor interest is high, and the funding round could conclude within two weeks, driven by OpenAI’s rapid revenue growth. Existing investors like Thrive Capital, Khosla Ventures, and Microsoft Corp. MSFT are expected to participate, with new investors including Nvidia Corp. NVDA and Apple Inc. AAPL also planning to invest.
If the restructuring fails, OpenAI would need to renegotiate its valuation with investors, likely at a lower figure.
OpenAI stated it remains focused on building AI for everyone’s benefit while working with its non-profit board. The removal of the profit cap requires approval from the non-profit board, which includes CEO Sam Altman and entrepreneur Bret Taylor.
OpenAI has also discussed with lawyers the possibility of transitioning to a for-profit benefit corporation, similar to rivals like Anthropic and xAI. The removal of the profit cap would significantly benefit early investors but could raise questions about OpenAI’s governance and mission.
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Why It Matters: The potential $150 billion valuation is a significant leap from previous estimates and underscores the growing importance of AI in the tech industry.
However, the transition from a non-profit to a for-profit model has not been without controversy. Elon Musk, who co-founded OpenAI in 2015, has questioned the legality of this shift, especially given the involvement of major tech companies like Apple and Nvidia.
Adding to the complexity, OpenAI is also embroiled in a high-profile copyright lawsuit, making efforts to keep the files of its former co-founder, Ilya Sutskever, confidential.
Despite these challenges, OpenAI continues to push forward with its technological advancements. Recently, the company unveiled its new ‘o1’ model, a significant step towards achieving human-like AI, although it comes with its own set of flaws.
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