Elon Musk's xAI Valued At $18 Billion In Latest Funding Round As Musk Looks To Take On $80 Billion OpenAI, A Company He Co-Founded

Elon Musk is reportedly raising $6 billion at a $18 billion valuation for his latest venture, xAI.Corp. 

Initially, xAI was set to raise $3 billion with a premoney valuation of $15 billion. However, because of overwhelming interest from investors, the terms of the deal were renegotiated, resulting in a significant increase in valuation.

"We all received an email that basically said, ‘It's now $6B on $18B, and don't complain because a lot of other people want in," an anonymous source told TechCrunch. 

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Among the prominent investors participating in the funding round are Sequoia Capital and Future Ventures. Future Ventures was cofounded by Musk’s longtime friend Steve Jurvetson. Jurvetson, who has been a steadfast supporter of Musk’s ventures, served as a director at Tesla until 2020 and sits on the SpaceX board. 

In its pitch to investors, xAI said it aims to "connect the digital and physical worlds," according to TechCrunch. The company’s goal is to train its artificial intelligence (AI) with data from Musk's companies â€" X, SpaceX, Tesla Inc., The Boring Company and Neuralink Corp. 

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Founded in 2023, xAI launched its AI bot Grok in November to use "AI tools that maximally benefit all of humanity." Grok is available for use on the X platform.

Investments in xAI are facilitated through a special purpose vehicle (SPV). For investments over $10 million, a 5% upfront fee and a management fee of 1% applies, with carried interest set at 10%. Smaller investments will incur a management fee of 2% and carried interest of 20%, though these amounts and fees may vary.

Business Insider reported that xAI sent an email to potential investors stating, “A significant number of LPs [limited partnerships] have been waiting for this deal since December 2023.” The email also said that xAI has “secured allocation in the upcoming equity round of x.AI” and that before its “first official funding round, Elon allocated a certain number of shares to his closet circle (a few GPs) at a premoney valuation of $15 billion.”

Microsoft Corp.-backed OpenAI, xAI’s main competitor, boasts a valuation of $80 billion. Musk was involved as a founder and investor in OpenAI and has since filed a lawsuit against the company for breaching its founding agreement of being a nonprofit organization. 

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