#188 From Turmoil to Triumph: OpenAI’s New $6.6 Billion Raise. But Microsoft has Doubts
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OpenAI has just raised a whopping $6.6 billion in new funding, despite experiencing more internal drama than a season of your favorite TV show.
Negotiating with tech giants and private investors all at once, OpenAI is now valued at $157 billion, which is comparable to some big hitters like Goldman Sachs, Uber, and AT&T.
Not bad for a company founded on the dream of making machines as smart as humans, right?
Just a few months ago, OpenAI’s valuation was $86 billion, after employees sold some shares. But with this latest round of funding, the AI giant is officially in the big leagues.
This $6.6 billion raise is one of the largest private funding rounds ever—though it still trails behind the $10 billion that Microsoft poured into OpenAI in January 2023.
Fun fact: Elon Musk's AI startup, xAI, also raised $6 billion this year. AI startups are raking in cash like it’s going out of style!
The Fine Print: Investor Safeguards and OpenAI’s Future
There’s a catch though—investors are hedging their bets.
If OpenAI doesn't complete its transformation into a full-on for-profit company within two years, investors have the right to pull their money. Currently, OpenAI operates as a nonprofit, with a for-profit arm allowing investors to dip their toes into its future profits.
Leading this round is venture capital firm Thrive Capital, which is throwing $1.25 billion into the pot. Microsoft, which is practically OpenAI’s BFF at this point, is investing just under $1 billion.
And don’t forget SoftBank, Nvidia, and Tiger Global Management, all pitching in significant sums, alongside names like Cathie Wood’s Ark Investment Management and Altimeter Capital.
Ark and Altimeter are each putting in $250 million—the minimum needed just to get a look at OpenAI’s financial docs. Talk about high stakes!
Other backers include Khosla Ventures, Fidelity, and MGX, a UAE-based firm focused on AI.
Even Apple flirted with the idea of investing, but talks fell through. It would’ve been a rare move for the iPhone maker, which usually prefers keeping its investments close to home.
Now, OpenAI isn't just playing against its own internal drama—there’s fierce competition in the AI arena.
OpenAI specifically asked investors not to throw money into some of its biggest rivals, including Anthropic, Safe Superintelligence, and Musk’s xAI.
Anthropic was founded by former OpenAI employees, and Safe Superintelligence counts Ilya Sutskever, OpenAI’s former chief scientist, as a co-founder. It’s a tangled web of ex-colleagues turned rivals!
And let’s not forget the big guns. Google and Meta are each pumping billions into AI research, so it’s not just startups that OpenAI has to keep an eye on. The AI race is heating up, and the stakes couldn’t be higher.
At the center of all this is ChatGPT, the AI chatbot that’s become OpenAI’s crown jewel. With 250 million weekly active users and 11 million paying subscribers, ChatGPT is the talk of the AI town.
Businesses are getting in on the action too, with around 1 million of them shelling out for access to OpenAI’s tech.
But here’s the kicker: OpenAI is still burning through cash like it’s going out of fashion. It’s expected to lose $5 billion this year, despite bringing in $3.7 billion in revenue.
That’s a tough pill to swallow for a company that’s riding high on public perception. Still, OpenAI is optimistic. The company predicts it’ll hit $11.6 billion in revenue by 2025—if everything goes according to plan.
The cost of developing and operating new AI models is sky-high, and it doesn’t help that AI researchers command salaries in the millions. You might think managing machine learning models is easy, but it’s about as cheap as a Tesla Roadster (spoiler: it’s not).
Amid all the financial wheeling and dealing, OpenAI has been rolling out new products at breakneck speed. This year, they’ve added a string of business-savvy hires to complement their research-heavy team.
One of the most notable is Sarah Friar, the company’s first-ever CFO, who played a key role in the recent fundraising blitz.
But with new faces comes friction. The company’s culture, once dominated by researchers, is shifting, and it’s not all rainbows and butterflies. There have been personal disputes among top execs, leading to multiple high-profile departures.
Just last week, Chief Technology Officer Mira Murati left the company. If the internal turmoil keeps up, OpenAI might need more than just deep pockets to weather the storm.
The company has navigated a high-stakes fundraising process, emerged with a sky-high valuation, and continues to push the boundaries of what AI can do.
Still, competition is fierce, internal tensions are bubbling, and the path to profitability remains a tricky one.
In the words of AI enthusiasts everywhere: buckle up, because the AI race is far from over!