OpenAI, the research lab responsible for the viral ChatGPT chatbot, is in talks to sell shares in a deal that would value the company at $29 billion, according to sources familiar with the matter. This would make it one of the most valuable U.S. startups on paper, despite generating little revenue.
Venture-capital firms Thrive Capital and Founders Fund are in talks to buy the shares, and the deal could total at least $300 million in OpenAI share sales. The deal would roughly double OpenAI’s valuation from a prior tender offer completed in 2021, when the company was valued at $14 billion.
OpenAI has generated tens of millions of dollars in revenue from selling its AI software to developers, but some investors have expressed skepticism that the company can generate significant revenue from its large language model. If the tender offer goes through at the current valuation, OpenAI would be one of the few startups able to raise money at premium valuations in the private market, where investors have been hesitant to invest in new deals due to last year’s tech downturn.
In addition to the talks with Thrive Capital and Founders Fund, Microsoft has also been in advanced discussions to increase its investment in OpenAI. In 2019, Microsoft invested $1 billion in the company and became its preferred partner for commercializing new technologies for services such as Bing and Microsoft Design.
OpenAI, founded by technology investor Sam Altman in 2015, was created as a nonprofit with the goal of advancing artificial intelligence research for the benefit of humanity. Its initial backers included Elon Musk, Reid Hoffman, and Altman himself. In 2019, Altman created a for-profit arm in order to more easily raise money to fund the computing power needed to train its algorithms.
ChatGPT, the chatbot that provides intelligent responses to user queries, reached one million users a few days after its November 30th launch, according to a tweet from Altman. Some industry experts have praised the tool as a major technological breakthrough and a potential alternative to current search engines in the future, although Altman has acknowledged that the program’s outputs often contain factual errors.
OpenAI’s ultimate goal is to achieve AGI (artificial general intelligence), or technology that fully mirrors the intelligence and capabilities of humans. Altman said that OpenAI’s tools could transform technology in a way similar to the invention of the smartphone and tackle larger scientific challenges. He also stated that the company has no plans to be acquired or go public, meaning that investors would likely only be able to cash out through secondary share sales.
Altman has recently told investors that the company could generate up to $1 billion in annual revenue by charging consumers and businesses for its products. Prior investors in OpenAI include Khosla Ventures and Tiger Global Management.
The company has limited some venture investors’ profits to approximately 20 times their investments, with the ability to earn greater returns tied to milestones such as achieving profitability or reaching a certain valuation.
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