OpenAI Raises $6.6B, Valued at $157B in Record-Breaking Funding Round

ChatGPT maker OpenAI has closed the largest VC round of all time. The startup announced it raised $6.6 billion in a funding round that values OpenAI at $157 billion post-money. This round, led by previous investor Thrive Capital, brings OpenAI’s total funding from all investors to $17.9 billion, according to Crunchbase. This is $7 billion more than originally anticipated, placing OpenAI at nearly 40 times its reported revenue.

Key Investors in the Round

Thrive Capital invested approximately $1.3 billion, with the option to invest up to $1 billion more through 2025 if certain revenue goals are met. Other participants in the round included major names such as Microsoft, Nvidia, SoftBank, Khosla Ventures, Altimeter Capital, Fidelity, and MGX. The Wall Street Journal reported Microsoft’s investment at just under $1 billion, with Nvidia pledging $100 million and SoftBank contributing $500 million.

Strategic Use of New Funds

“The new funding will allow us to double down on our leadership in frontier AI research, increase compute capacity, and continue building tools that help people solve hard problems,” OpenAI wrote in a blog post. The company shared its gratitude for investor support and outlined its vision for shaping an AI-powered future.

Investor Exclusivity and Potential Restrictions

The funding comes with potential caveats. The Financial Times reported that OpenAI has requested investors avoid backing competitors like Anthropic and xAI. While TechCrunch sought further clarification, OpenAI has yet to comment.

Internal Leadership Changes

Despite its rapid growth, OpenAI has seen significant changes in its leadership team. CTO Mira Murati, Chief Research Officer Bob McGrew, and VP of Research Barret Zoph all announced their resignations in late September. Earlier this year, prominent research scientist Andrej Karpathy, co-founder and former Chief Scientist Ilya Sutskever, and ex-Safety Leader Jan Leike also departed. Co-founder John Schulman announced his exit in August, and President Greg Brockman is currently on sabbatical. Out of the 13 original founders from 2015, only three remain. These changes reflect the growing pressures of leading in a highly competitive and rapidly evolving industry.

Dominating the AI Industry

Already the world’s best-funded AI startup, OpenAI’s latest round sets it apart even further from competitors. Elon Musk’s AI venture, xAI, raised over $6 billion earlier this year but was valued at only $24 billion. Similarly, OpenAI’s rival Anthropic has secured just over half of OpenAI’s total at $9.7 billion, while other AI startups like Cohere and Mistral hold war chests of around $1 billion each.

OpenAI’s Need for Additional Capital

OpenAI’s need for additional capital stems from its expansive operations. Reports indicate the company has spent approximately $7 billion on model training and $1.5 billion on staffing. CEO Sam Altman previously revealed that one of the company’s flagship models, GPT-4, cost over $100 million to train, and it was once reported that ChatGPT alone cost $700,000 per day to run.

Market Leadership and Financial Projections

With over 250 million users, including 10 million paying subscribers, ChatGPT is a key revenue driver for OpenAI. Its annualized revenue is projected to surpass $3.4 billion, with ChatGPT alone expected to generate $2.7 billion this year. OpenAI projects its revenue will reach $100 billion by 2029, though it faces stiff competition from companies like Runway, Luma Labs, Anthropic, Google, and Amazon.

Facing Increased Competitive Pressures

The competitive landscape continues to heat up, with startups like Runway and Luma Labs already releasing advanced video generation models ahead of OpenAI. Companies like Meta and Google are also developing open models that could commoditize text- and image-generating AI. These pressures may lead OpenAI to increase the price of its premium ChatGPT Plus subscription from $20 per month to $44 by 2029.

Future Governance Changes and For-Profit Shift

OpenAI may also undergo structural changes to attract more investment. Currently governed by a nonprofit that caps investor returns, the company is expected to move toward a for-profit model within the next two years. This shift is reportedly a condition for investors in the new funding round, who will have the option to retract their investments if the change does not occur.

Long-Term Bets and Strategic Expansion

Raising additional capital could enable OpenAI to make long-term investments, such as developing AI chips and datacenters to reduce reliance on Nvidia. It may also strengthen its position through licensing agreements with data providers like Reddit and Condé Nast, potentially shielding the company from IP lawsuits.

Looking Ahead: OpenAI's Future Prospects

As OpenAI navigates leadership transitions and the competitive AI landscape, it remains well-positioned to continue driving innovation in frontier AI research. The significant funding boost will allow OpenAI to focus on long-term projects, such as improving AI infrastructure and expanding its ecosystem of tools. By maintaining its leadership role, OpenAI is set to play a pivotal role in shaping the future of AI, ensuring it remains a transformative force across industries worldwide.