OpenAI

OpenAI Raises $300 Million from VC Firms at Valuation of $27B-$29B

OpenAI, the startup that created the popular conversational AI model ChatGPT, has secured new financial backers in the form of venture capital (VC) firms including Tiger Global, Sequoia Capital, Andreessen Horowitz, Thrive, and K2 Global. Founders Fund is also reportedly investing. The VCs have invested over $300 million at a valuation of $27 billion to $29 billion. This comes in addition to a significant investment from Microsoft, which closed in January at a rumored $10 billion. The new investment marks the closing of the tender offer that was reported by the Wall Street Journal in January.

While Microsoft’s investment was strategic, with plans to integrate OpenAI’s technology across multiple areas of its business, the VC firms have invested as financial backers. The term sheets have been signed, and the money has been transferred. OpenAI’s countersigning is the only remaining step before making the investment public. This investment means that outside investors now own more than 30% of OpenAI.

OpenAI’s technical teams work across various areas, but its GPT family of large language models has gained significant attention recently. ChatGPT, the conversational AI service released in November 2022, has been a hit, with more than 1 billion visitors to its website in February. The startup introduced ChatGPT Plus, a paid version with a faster user experience, in February, and it was upgraded with multimodal LLM GPT-4 in March.

Generative AI is a trending topic, but OpenAI has faced criticism surrounding the consumer-facing ChatGPT product. Questions have been raised about its truthfulness, whether it can be a virus, how it handles privacy, and whether it can be manipulated to be toxic or commit libel. OpenAI acknowledges the work that needs to be done and continues to develop and iterate its services.

In a time when investors are seeking interesting AI startups to back, OpenAI is an attractive opportunity. The VC firms’ investment signals that they see the potential for OpenAI’s growth and success.