OpenAI's Strategic Move: Requesting Investors to Avoid Funding Rival AI Startups

OpenAI Asks Investors to Avoid Five AI Startups, Including Sutskever's SSI

As global investors such as Thrive Capital and Tiger Global invest $6.6 billion in OpenAI, the ChatGPT-maker sought a commitment beyond just capital -- they also wanted investors to refrain from funding five companies they perceive as close competitors, sources told Reuters. The list of companies includes rivals developing large language models such as Anthropic and Elon Musk's xAI. OpenAI's co-founder Ilya Sutskever's new company, Safe Superintelligence (SSI), is also on the list. These companies are racing against OpenAI to build large language models, which requires billions in funding. Two AI applications firms, including AI search startup Perplexity and enterprise search firm Glean, were also named in OpenAI's conversation with investors, suggesting OpenAI plans to sell more of its tools to enterprises and end users as it makes ambitious revenue growth projection to $11.6 billion in 2025 from $3.7 billion this year. OpenAI, Perplexity and SSI declined to comment. Anthropic and Glean did not immediately respond. XAI could not be reached for a comment.

OpenAI asks investors to avoid five AI startups including Ilya Sutskever's SSI

As global investors such as Thrive Capital and Tiger Global invest $6.6 billion in OpenAI, the ChatGPT-maker sought a commitment beyond just capital - they also wanted investors to refrain from funding five companies they perceive as close competitors, sources told Reuters. The list of companies includes rivals developing large language models such as Anthropic and Elon Musk's xAI. OpenAI's co-founder Ilya Sutskever's new company, Safe Superintelligence (SSI), is also on the list. These companies are racing against OpenAI to build large language models, which requires billions in funding. Two AI applications firms, including AI search startup Perplexity and enterprise search firm Glean, were also named in OpenAI's conversation with investors, suggesting OpenAI plans to sell more of its tools to enterprises and end users as it makes ambitious revenue growth projection to $11.6 billion in 2025 from $3.7 billion this year. OpenAI, Perplexity and SSI declined to comment. Anthropic and Glean did not immediately respond. XAI could not be reached for a comment. The request, while not legally binding, demonstrates how OpenAI is leveraging its appeal to secure exclusive commitments from its financial backers in a competitive field where access to capital is crucial. While such expectations are not uncommon in the venture capital world, it's unusual to make a list like OpenAI has. Most venture investors generally refrain from investing in direct competitors of their portfolio companies to avoid reputational risks. However, this line has been blurred for late-stage investors who tend to spread their bets, such as SoftBank and Fidelity, which has invested in both xAI and OpenAI. While OpenAI's request does not apply to its past investors and the investments they have already made, it could have implications for OpenAI investors and the five competitors in their future fundraising efforts. The Financial Times and Wall Street Journal first reported some of the companies on the list.

OpenAI tells investor to not invest in five AI startups including Sutskever's SSI

(Reuters) - As global investors such as Thrive Capital and Tiger Global invest $6.6 billion in OpenAI, the ChatGPT-maker sought a commitment beyond just capital -- they also wanted investors to refrain from funding five companies they perceive as close competitors, sources told Reuters. The list of companies includes rivals developing large language models such as Anthropic and Elon Musk's xAI. OpenAI's co-founder Ilya Sutskever's new company, Safe Superintelligence (SSI), is also on the list. These companies are racing against OpenAI to build large language models, commanding billions in funding. Two AI applications firms, including AI search startup Perplexity and enterprise search firm Glean, were also named in OpenAI's conversation with investors, suggesting OpenAI plans to sell more of its tools to enterprises and end users to grow revenue streams. OpenAI, Perplexity and SSI declined to comment. Anthropic and Glean did not immediately respond. XAI could not be reached for a comment. The Financial Times and Wall Street Journal first reported some of the companies on the list. (Reporting by Krystal Hu, Anna Tong and Kenrick Cai in New York; Editing by Lisa Shumaker)

OpenAI tells investor to not invest in five AI startups including Sutskever's SSI

Oct 2 (Reuters) - As global investors such as Thrive Capital and Tiger Global invest $6.6 billion in OpenAI, the ChatGPT-maker sought a commitment beyond just capital -- they also wanted investors to refrain from funding five companies they perceive as close competitors, sources told Reuters. The list of companies includes rivals developing large language models such as Anthropic and Elon Musk's xAI. OpenAI's co-founder Ilya Sutskever's new company, Safe Superintelligence (SSI), is also on the list. These companies are racing against OpenAI to build large language models, commanding billions in funding. Advertisement · Scroll to continue Two AI applications firms, including AI search startup Perplexity and enterprise search firm Glean, were also named in OpenAI's conversation with investors, suggesting OpenAI plans to sell more of its tools to enterprises and end users to grow revenue streams. OpenAI, Perplexity and SSI declined to comment. Anthropic and Glean did not immediately respond. XAI could not be reached for a comment. The Financial Times and Wall Street Journal first reported some of the companies on the list. Reporting by Krystal Hu, Anna Tong and Kenrick Cai in New York; Editing by Lisa Shumaker Our Standards: The Thomson Reuters Trust Principles., opens new tab Anna Tong Thomson Reuters Anna Tong is a correspondent for Reuters based in San Francisco, where she reports on the technology industry. She joined Reuters in 2023 after working at the San Francisco Standard as a data editor. Tong previously worked at technology startups as a product manager and at Google where she worked in user insights and helped run a call center. Tong graduated from Harvard University. 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. 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.

OpenAI Pressures Investors To Avoid Rivals After Employee Exodus

OpenAI has allegedly asked its investors to avoid funding five rival artificial intelligence (AI) startups. This maneuver comes as the company secures a massive $6.6 billion investment and grapples with internal challenges, including employee departures and questions about its long-term vision. According to internal sources, OpenAI has imposed restrictions on its investors, requiring them to refrain from funding five key competitors. This revelation comes as the company secures a massive $6.6 billion investment from global investors such as Thrive Capital and Tiger Global. OpenAI's list of competitors includes prominent players in the large language model space, such as Anthropic, Elon Musk's xAI, and Ilya Sutskever's new venture, Safe Superintelligence (SSI). These companies are in a fierce race to develop advanced AI models fueled by significant investments. Beyond the direct competition, OpenAI has also expressed concerns about AI application firms like Perplexity and Glean. By including these companies on its list, OpenAI suggests its intention to expand its market reach and increase revenue through enterprise and end-user sales. While OpenAI's request does not apply to its existing investors or their prior investments, it could affect the five targeted companies' future fundraising efforts. Investors like SoftBank and Fidelity, who have invested in both OpenAI and competitors, may find themselves in an uncomfortable situation.

OpenAI asks investors not to back rival start-ups such as Elon Musk's xAI

OpenAI has asked investors to avoid backing rival start-ups such as Anthropic and Elon Musk's xAI, as the ChatGPT maker seeks to shut out challengers and maintain its early lead in generative artificial intelligence. The San Francisco-based group, led by chief executive Sam Altman, has made clear that it expects an exclusive funding arrangement, according to three people with knowledge of the discussions. OpenAI is close to completing its latest $6.5bn funding round at a $150bn valuation. Seeking exclusive relationships with investors would restrict rivals' access to capital and strategic partnerships. The move risks inflaming existing tensions with rivals, especially Musk, who is suing OpenAI. Venture firms are party to sensitive information about the companies they invest in, and close relationships with one company can make it difficult or contentious to also back a rival. But exclusivity is rarely insisted on, according to VCs, and many leading firms have spread their bets in certain sectors. Sequoia Capital and Andreessen Horowitz, for instance, have both backed multiple AI start-ups, including both OpenAI and Musk's xAI. "It has been an unwritten rule in venture for a long time that you should not back competitor companies," said a partner at one leading VC firm, who added it was unusual to insist on such terms. The person added: "Uber had something similar: [telling investors] 'if you invest in us you can't invest in [our rivals]' when they were in full world domination mode . . . If a company holds all the cards, they can force people to do things unnaturally." Thrive, a venture capital firm founded by Josh Kushner, is leading the round and has committed $1bn. According to multiple investors with knowledge of the deal, other firms including early-OpenAI backer Khosla Ventures, SoftBank and the California Public Employees' Retirement System (Calpers) are planning to invest either directly or via special purpose vehicles. Khosla's vehicle could put in a total of $500mn or more, according to two of the people. SPVs -- entities through which venture funds can raise capital for a specific purpose -- were also used as part of large funding rounds for AI start-ups Anthropic and xAI in recent months, according to people with knowledge of the deals. OpenAI declined to comment. Khosla Ventures and Calpers declined to comment. Strategic investors including Microsoft, Nvidia and Apple have also discussed participating in the round in recent weeks, according to people familiar with the discussions. Investors have had to consider the company's recent tumult, including a boardroom coup a year ago in which founder Sam Altman was briefly ousted. Last week, chief technology officer Mira Murati announced she would be leaving the company in a surprise move -- the latest in a stream of senior departures this year. OpenAI is also working on a corporate restructure that would move the start-up further from its origins as a non-profit, and allow investors to capture more of the upside should the start-up turn a profit. Altman has held talks to hold equity in the company as part of the new fundraising, according to people familiar with the discussions, having previously said he did not want to take an ownership stake in the group. However, he has dismissed reports that he will get an equity stake of 7 per cent in the new for-profit entity -- which would be worth more than $10bn -- as "ludicrous" in a staff town hall. Musk, who co-founded and helped finance OpenAI in 2015 but stepped down three years later, filed a lawsuit in August that alleges the start-up abandoned its original not-for-profit mission to benefit humanity when it agreed a commercial partnership with Microsoft. Musk accused Altman of "deceit of Shakespearean proportions" and the lawsuit seeks to void the Microsoft deal, which is also being probed by US and European antitrust regulators.

OpenAI Stamps Feet, Says Investors Aren't Allowed to Back Its Rivals

"If a company holds all the cards, they can force people to do things unnaturally." OpenAI announced yesterday that it had officially raised $6.6 billion in its latest investment round, an eyewatering figure that hoists the still-private AI company's valuation to an equally eyewatering $157 billion. But according to OpenAI, this just isn't another major cash influx to a company that recently abandoned its nonprofit roots to embrace a for-profit model. In its announcement, OpenAI described the funding round as a sign of "progress" in its alleged "mission to ensure that artificial general intelligence benefits all of humanity." And that, apparently, is a burden that OpenAI believes that only it should be trusted with. According to the Financial Times, OpenAI demanded that its eventual investors abstain from also funding any of OpenAI's competitors such as billionaire Elon Musk's xAI and Claude maker Anthropic. In short, if an investor wanted in on the OpenAI round, they needed to be willing to keep things exclusive. "OpenAI said to people: 'We'll give you allocation but we want you to be involved in a meaningful way in the business so you can't commit to our competitors,'" one person with knowledge of the deal told the FT. This level of exclusivity is uncommon in the investing world. Often, because investing means access to proprietary information about a given company, an investor may naturally abstain from putting significant capital into rival companies. In other cases, though, an investor might want to spread funding across an industry, especially if they believe a nascent technology to be the future. In any case, OpenAI and CEO Sam Altman's insistence on exclusivity as central to the deal is pretty rare -- and could signal that OpenAI is feeling the heat from well-funded industry rivals. Some have pointed out that the strange deal echoes a policy held by the ridesharing app phenom Uber in the 2010s. "If a company holds all the cards," one unnamed VC told the FT, "they can force people to do things unnaturally." Through that lens, OpenAI's ability to raise nearly $7 billion while demanding exclusivity seems to speak to the company's dominance in the AI industry landscape. AI is an intensely competitive market, with the likes of Google, xAI, Meta, and Anthropic all in the race to come out ahead. And yet, it looks like major funds are willing to put all of their eggs in OpenAI CEO Sam Altman's basket. "Were grateful to our investors for their trust in us," reads OpenAI's announcement, "and we look forward to working with our partners, developers, and the broader community to shape an AI-powered ecosystem and future that benefits everyone."

Elon Musk Says 'OpenAI Is Evil' After ChatGPT-Parent Reportedly Asked Investors Not To Invest In Rivals, Including xAI

Tesla and SpaceX CEO Elon Musk has accused OpenAI of unfair funding practices after a report suggested that the AI startup has been discouraging investors from backing rival startups, including xAI. What Happened: On Wednesday, OpenAI announced that it had completed its latest fundraising at a staggering $150 billion valuation. During the negotiations, OpenAI insisted on an exclusive funding arrangement, reported the Financial Times, citing three people with knowledge of the matter. This indicates that ChatGPT-maker doesn't want investors to support rival startups such as Anthropic and Musk's xAI. Naturally, this move has intensified existing tensions with Musk, who is currently suing OpenAI. See Also: Mark Zuckerberg Says, Orion 'Is Probably Going To Be The Next Major Platform After Phones' -- Meta's New AR Wearables Real-Life Tony Stark Glasses In The Making? When the news reached Musk on X, formerly Twitter, the Tesla CEO, who co-founded OpenAI in 2015 but stepped down three years later, said, "OpenAI is evil." Subscribe to the Benzinga Tech Trends newsletter to get all the latest tech developments delivered to your inbox. Why It Matters: OpenAI's demand for exclusivity is unusual, as venture capital firms typically diversify their investments across various companies in a sector. Thrive, a venture capital firm founded by Joshua Kushner, led the funding round, committing $750 million from its own funds and approximately $550 million from its partners. Other firms, including early OpenAI backer Khosla Ventures, Tiger Global, Altimeter Capital, and the California Public Employees' Retirement System, have also invested in the company. Notably, Cathie Wood's Ark Venture Fund and SoftBank Group Corporation have also invested in OpenAI's latest funding round. Other possible participants speculated to be involved include major tech firms like Microsoft Corporation, which has already poured around $13 billion into the AI company over the past five years, as well as Nvidia Corporation. Check out more of Benzinga's Consumer Tech coverage by following this link. Read Next: After Google's $2.7B Acquisition Of Founders And Staff, This AI Startup Abandons Large Language Model Plans And Shifts Focus Away From Chatbots Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors. Market News and Data brought to you by Benzinga APIs