OpenAI's $150 Billion Valuation: A Corporate Structure Revolution in the Making

OpenAI's stunning $150 billion valuation hinges on upending corporate structure, sources say

OpenAI's new financing round is expected to come in the form of convertible notes, according to sources with direct knowledge of the matter, who said its $150 billion valuation will be contingent on whether the ChatGPT-maker can upend its corporate structure and remove a profit cap for investors. The details of the conditions of the $6.5 billion funding, which have not been previously reported, show how far OpenAI, the most valuable AI startup in the world, has come from a research-based non-profit, and the structural changes it's willing to make to attract ever more investment to fund its expensive pursuit of artificial general intelligence (AGI), or AI that surpasses human intelligence. The outsized funding round has seen strong investor demand and could be finalized in the next two weeks, given the rapid growth of OpenAI's revenue, sources added. Existing investors such as Thrive Capital, Khosla Ventures, as well as Microsoft are expected to participate. New investors including Nvidia and Apple also plan to invest. Sequoia Capital is also in talks to come back as a returning investor. If the restructuring is unsuccessful, OpenAI would need to renegotiate its valuation with investors at which their shares will be converted, likely at a lower number, sources told Reuters, who requested anonymity to discuss private matters. Asked about the financing and potential change, OpenAI said in a statement that it remains focusing on building AI that benefits everyone while working with its non-profit board. "The nonprofit is core to our mission and will continue to exist," the company spokesperson said. The removal of the profit cap would require approval from OpenAI's non-profit board, consisting of Chief Executive Sam Altman, entrepreneur Bret Taylor and seven other members. The company has also held discussions with lawyers about turning its non-profit structure to a for-profit benefit corporation, similar to what its rivals such as Anthropic and xAI are using, sources added, confirming media reports. It is unclear if such fundamental corporate structural changes could happen. The removal of the profit cap, which put a limit on investors' potential returns in OpenAI's for-profit subsidiary, would hand early investors an even bigger win. It could also raise questions about OpenAI's governance and departure from its non-profit mission. OpenAI has said the cap was put in place to "incentivize them to research, develop, and deploy AGI in a way that balances commerciality with safety and sustainability, rather than focusing on pure profit-maximization." The San Francisco-based AI lab, founded in 2015 as a nonprofit research project, with the goal of building AI for the benefit of humanity, is currently controlled by a non-profit parent organization. It has accelerated its commercialization efforts by selling subscription-based services like ChatGPT to consumers and enterprises, which now boasts over 200 million users. Existing investors are beholden to a capped limit to their return on investment, with any additional returns to be routed to the non-profit. Returns were capped at 100x the investment for investors in OpenAI's first round of financing. "We expect this multiple to be lower for future rounds," the company said in a 2019 blog post detailing the structure. OpenAI used this model to raise more than $10 billion in recent years, with the majority coming from Microsoft. It was last valued at $80 billion in February in a tender offer deal where the company sold existing shares led by Thrive Capital. Published - September 14, 2024 11:55 am IST Read Comments

OpenAI's stunning $150 billion valuation hinges on upending corporate structure, sources say

OpenAI's new financing round is expected to come in the form of convertible notes, according to sources with direct knowledge of the matter, who said its $150 billion valuation will be contingent on whether the ChatGPT-maker can upend its corporate structure and remove a profit cap for investors. The details of the conditions of the $6.5 billion funding, which have not been previously reported, show how far OpenAI, the most valuable AI startup in the world, has come from a research-based non-profit, and the structural changes it's willing to make to attract ever more investment to fund its expensive pursuit of artificial general intelligence (AGI), or AI that surpasses human intelligence. The outsized funding round has seen strong investor demand and could be finalized in the next two weeks, given the rapid growth of OpenAI's revenue, sources added. Existing investors such as Thrive Capital, Khosla Ventures, as well as Microsoft are expected to participate. New investors including Nvidia and Apple also plan to invest. Sequoia Capital is also in talks to come back as a returning investor. If the restructuring is unsuccessful, OpenAI would need to renegotiate its valuation with investors at which their shares will be converted, likely at a lower number, sources told Reuters, who requested anonymity to discuss private matters. Asked about the financing and potential change, OpenAI said in a statement that it remains focusing on building AI that benefits everyone while working with its non-profit board. "The nonprofit is core to our mission and will continue to exist," the company spokesperson said. The removal of the profit cap would require approval from OpenAI's non-profit board, consisting of Chief Executive Sam Altman, entrepreneur Bret Taylor and seven other members. The company has also held discussions with lawyers about turning its non-profit structure to a for-profit benefit corporation, similar to what its rivals such as Anthropic and xAI are using, sources added, confirming media reports. It is unclear if such fundamental corporate structural changes could happen. The removal of the profit cap, which put a limit on investors' potential returns in OpenAI's for-profit subsidiary, would hand early investors an even bigger win. It could also raise questions about OpenAI's governance and departure from its non-profit mission. OpenAI has said the cap was put in place to "incentivize them to research, develop, and deploy AGI in a way that balances commerciality with safety and sustainability, rather than focusing on pure profit-maximization." The San Francisco-based AI lab, founded in 2015 as a nonprofit research project, with the goal of building AI for the benefit of humanity, is currently controlled by a non-profit parent organization. It has accelerated its commercialization efforts by selling subscription-based services like ChatGPT to consumers and enterprises, which now boasts over 200 million users. Existing investors are beholden to a capped limit to their return on investment, with any additional returns to be routed to the non-profit. Returns were capped at 100x the investment for investors in OpenAI's first round of financing. "We expect this multiple to be lower for future rounds," the company said in a 2019 blog post detailing the structure. OpenAI used this model to raise more than $10 billion in recent years, with the majority coming from Microsoft. It was last valued at $80 billion in February in a tender offer deal where the company sold existing shares led by Thrive Capital. SHARE Copy linkEmailFacebookTwitterTelegramLinkedInWhatsAppRedditPublished on September 14, 2024

Exclusive-OpenAI's stunning $150 billion valuation hinges upending corporate structure, sources say

(Reuters) - OpenAI's new financing round is expected to come in the form of convertible notes, according to sources with direct knowledge of the matter, who said its $150 billion valuation will be contingent on whether the ChatGPT-maker can upend its corporate structure and remove a profit cap for investors. The details of the conditions of the $6.5 billion funding, which have not been previously reported, shows how far OpenAI, the most valuable AI startup in the world, has come from a research-based non-profit, and the structural changes it's willing to make to attract ever more investment to fund its expensive pursuit of artificial general intelligence (AGI). The outsized funding round has seen strong investor demand and could be finalized in the next two weeks, given the rapid growth of OpenAI's revenue, sources added. Existing investors such as Thrive Capital, Khosla Ventures, as well Microsoft are expected to participate. New investors including Nvidia and Apple also plan to invest. Sequoia Capital is also in talks to come back as a returning investor. If the restructuring is unsuccessful, OpenAI would need to renegotiate its valuation with investors at which their shares will be converted at, likely at a lower number, sources told Reuters, who requested anonymity to discuss private matters. (Reporting by Krystal Hu in New York and Kenrick Cai in San Francisco; editing by Kenneth Li and Diane Craft)

Exclusive: OpenAI's stunning $150 billion valuation hinges upending corporate structure, sources say

Sept 13 (Reuters) - OpenAI's new financing round is expected to come in the form of convertible notes, according to sources with direct knowledge of the matter, who said its $150 billion valuation will be contingent on whether the ChatGPT-maker can upend its corporate structure and remove a profit cap for investors. The details of the conditions of the $6.5 billion funding, which have not been previously reported, shows how far OpenAI, the most valuable AI startup in the world, has come from a research-based non-profit, and the structural changes it's willing to make to attract ever more investment to fund its expensive pursuit of artificial general intelligence (AGI). Advertisement · Scroll to continue The outsized funding round has seen strong investor demand and could be finalized in the next two weeks, given the rapid growth of OpenAI's revenue, sources added. Existing investors such as Thrive Capital, Khosla Ventures, as well Microsoft (MSFT.O), opens new tab are expected to participate. New investors including Nvidia (NVDA.O), opens new tab and Apple (AAPL.O), opens new tab also plan to invest. Sequoia Capital is also in talks to come back as a returning investor. Advertisement · Scroll to continue If the restructuring is unsuccessful, OpenAI would need to renegotiate its valuation with investors at which their shares will be converted at, likely at a lower number, sources told Reuters, who requested anonymity to discuss private matters. OpenAI declined to comment. Reporting by Krystal Hu in New York and Kenrick Cai in San Francisco; editing by Kenneth Li and Diane Craft Our Standards: The Thomson Reuters Trust Principles., opens new tab Krystal Hu Thomson Reuters Krystal reports on venture capital and startups for Reuters. She covers Silicon Valley and beyond through the lens of money and characters, with a focus on growth-stage startups, tech investments and AI. She has previously covered M&A for Reuters, breaking stories on Trump's SPAC and Elon Musk's Twitter financing. Previously, she reported on Amazon for Yahoo Finance, and her investigation of the company's retail practice was cited by lawmakers in Congress. Krystal started a career in journalism by writing about tech and politics in China. She has a master's degree from New York University, and enjoys a scoop of Matcha ice cream as much as getting a scoop at work. Kenrick Cai Thomson Reuters Kenrick Cai is a correspondent for Reuters based in San Francisco. He covers Google, its parent company Alphabet and artificial intelligence. Cai joined Reuters in 2024. He previously worked at Forbes magazine, where he was a staff writer covering venture capital and startups. He received a Best in Business award from the Society for Advancing Business Editing and Writing in 2023. He is a graduate of Duke University.

OpenAI's stunning $150 billion value hinges upending corporate structure

The outsized funding round has seen strong investor demand and could be finalized in the next two weeks, given the rapid growth of OpenAI's revenue, sources added. OpenAI's new financing round is expected to come in the form of convertible notes, according to sources with direct knowledge of the matter, who said its $150 billion valuation will be contingent on whether the ChatGPT-maker can upend its corporate structure and remove a profit cap for investors. The details of the conditions of the $6.5 billion funding, which have not been previously reported, shows how far OpenAI, the most valuable AI startup in the world, has come from a research-based non-profit, and the structural changes it's willing to make to attract ever more investment to fund its expensive pursuit of artificial general intelligence (AGI). The outsized funding round has seen strong investor demand and could be finalized in the next two weeks, given the rapid growth of OpenAI's revenue, sources added. Who are the existing investors? Existing investors such as Thrive Capital, Khosla Ventures, as well Microsoft are expected to participate. New investors including Nvidia and Apple also plan to invest. Sequoia Capital is also in talks to come back as a returning investor. If the restructuring is unsuccessful, OpenAI would need to renegotiate its valuation with investors at which their shares will be converted at, likely at a lower number, sources told Reuters, who requested anonymity to discuss private matters. OpenAI declined to comment.

Exclusive-OpenAI's stunning $150 billion valuation hinges upending corporate structure, sources say

By Krystal Hu and Kenrick Cai (Reuters) - OpenAI's new financing round is expected to come in the form of convertible notes, according to sources with direct knowledge of the matter, who said its $150 billion valuation will be contingent on whether the ChatGPT-maker can upend its corporate structure and remove a profit cap for investors. The details of the conditions of the $6.5 billion funding, which have not been previously reported, shows how far OpenAI, the most valuable AI startup in the world, has come from a research-based non-profit, and the structural changes it's willing to make to attract ever more investment to fund its expensive pursuit of artificial general intelligence (AGI).

Exclusive-OpenAI's stunning $150 billion valuation hinges on upending corporate structure, sources say

By Krystal Hu and Kenrick Cai (Reuters) - OpenAI's new financing round is expected to come in the form of convertible notes, according to sources with direct knowledge of the matter, who said its $150 billion valuation will be contingent on whether the ChatGPT-maker can upend its corporate structure and remove a profit cap for investors. The details of the conditions of the $6.5 billion funding, which have not been previously reported, shows how far OpenAI, the most valuable AI startup in the world, has come from a research-based non-profit, and the structural changes it's willing to make to attract ever more investment to fund its expensive pursuit of artificial general intelligence (AGI).

OpenAI's $150B Valuation Hinges On Whether Sam Altman-Led AI Startup Can Remove Profit Cap For Investors: Report - Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL)

AI startup OpenAI's new funding round could value the AI startup at $150 billion, contingent on significant corporate changes. What Happened: OpenAI's upcoming financing round is expected to involve convertible notes. The valuation of $150 billion will depend on whether OpenAI can alter its corporate structure and eliminate a profit cap for investors, reported Reuters, citing sources familiar with the matter. The $6.5 billion funding details, not previously disclosed, highlight OpenAI's shift from a research-based non-profit to a more investment-attractive entity. This change aims to support its pursuit of artificial general intelligence (AGI), AI surpassing human intelligence. Investor interest is high, and the funding round could conclude within two weeks, driven by OpenAI's rapid revenue growth. Existing investors like Thrive Capital, Khosla Ventures, and Microsoft Corp. MSFT are expected to participate, with new investors including Nvidia Corp. NVDA and Apple Inc. AAPL also planning to invest. If the restructuring fails, OpenAI would need to renegotiate its valuation with investors, likely at a lower figure. See Also: Brazil's Supreme Court Lifts Freeze On Starlink And X's Finances After Elon Musk's Companies Cough Up $3.3 Million In Fines OpenAI stated it remains focused on building AI for everyone's benefit while working with its non-profit board. The removal of the profit cap requires approval from the non-profit board, which includes CEO Sam Altman and entrepreneur Bret Taylor. OpenAI has also discussed with lawyers the possibility of transitioning to a for-profit benefit corporation, similar to rivals like Anthropic and xAI. The removal of the profit cap would significantly benefit early investors but could raise questions about OpenAI's governance and mission. Subscribe to the Benzinga Tech Trends newsletter to get all the latest tech developments delivered to your inbox. Why It Matters: The potential $150 billion valuation is a significant leap from previous estimates and underscores the growing importance of AI in the tech industry. However, the transition from a non-profit to a for-profit model has not been without controversy. Elon Musk, who co-founded OpenAI in 2015, has questioned the legality of this shift, especially given the involvement of major tech companies like Apple and Nvidia. Adding to the complexity, OpenAI is also embroiled in a high-profile copyright lawsuit, making efforts to keep the files of its former co-founder, Ilya Sutskever, confidential. Despite these challenges, OpenAI continues to push forward with its technological advancements. Recently, the company unveiled its new 'o1' model, a significant step towards achieving human-like AI, although it comes with its own set of flaws. Check out more of Benzinga's Consumer Tech coverage by following this link. Read Next: Mark Zuckerberg Live Event Sold Out Stadium: Meta CEO Attracted Thousands Eager To Hear Him Speak Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Photo courtesy: Shutterstock Market News and Data brought to you by Benzinga APIs

Tiger Global plans to join OpenAI's hot new funding round, which would value it at more than $150 billion

Tiger Global is planning to join OpenAI's buzzy new funding round that would value the artificial intelligence startup at more than $150 billion, according to sources familiar with the situation. Thrive Capital is leading the round and plans to invest $1 billion. Microsoft, Nvidia and Apple are reportedly in talks to join as well. The Information was the first to report on Tiger Global's planned participation. Earlier this year, OpenAI was valued at a reported $80 billion, up from $29 billion the prior year. Annualized revenue reportedly surpassed $2 billion earlier this year. Growth took off in late 2022 after the company launched its ChatGPT chatbot. That momentum has continued with new OpenAI products for businesses and an expansion into AI-generated photos and videos. The company has doubled its number of weekly active users from late last year to 200 million, according to OpenAI. The news comes one day after OpenAI released o1, a preview of its new AI model focused on reasoning and "solving hard problems." It also comes after OpenAI CEO Sam Altman joined leaders from Anthropic, Nvidia, Microsoft, Google, Amazon and several American power and utility companies at the White House to discuss the future of artificial intelligence energy infrastructure in the U.S. The group also discussed bringing the public and private sectors together to talk about AI's energy usage, data center capacity, semiconductor manufacturing, and grid capacity, sources familiar with the meeting told CNBC. A spokesperson for OpenAI did not immediately respond to a request for comment.

Tiger Global plans to join OpenAI's multi-billion dollar funding round

(Reuters) -Venture capital firm Tiger Global Management plans to participate in the multi-billion-dollar funding round for OpenAI, which could value the ChatGPT developer at $150 billion, a source familiar with the matter said on Friday. OpenAI's meteoric popularity has made the startup one of the biggest players in the artificial intelligence industry and ignited widespread interest in generative AI, with businesses racing to capitalize on the technology.