OpenAI: How an AI Startup Closed $6.6bn in Funding

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The road to eminence has been a bumpy one for OpenAI
OpenAI's latest funding round saw it close US$6.6bn in funding, making it one of the world's highest valued private companies

In a year of big developments for the AI startup, OpenAI has surfed the tumultuous waves of innovation and disruption to secure a monumental US$6.6bn in funding, pushing its valuation to an astonishing US$157bn. 

This development not only makes the AI company the leader in the space, but  cement its position as one of the most valuable private companies in the world.

Such remarkable ascent not only reflects OpenAI’s prowess in the tech arena but also underscores a pivotal moment for the broader AI industry.

AI interest red hot

Businesses are currently pouring in billions into AI investments, with many companies now listing it as their top priority. 

As a result, this newest round of funding has seen AI chip titan Nvidia enter as a new and one of the main funding participants in the Gen AI company. Long-time investor Microsoft also played a big role alongside them in the latest round.

Concurrently, OpenAI Chief Financial Officer Sarah Friar told employees that the company will be able to provide liquidity for them through a tender offer to buy back their shares in the company following the funding, coinciding with rumours that Sam Altman was seeking to turn the company from a non-profit to for-profit company.

The bones of a billion-dollar startup

The road to eminence has been a bumpy one for OpenAI. The company has juggled success on one hand, with setbacks on the other throughout this year.

Recent departures of top executives at OpenAI raise questions about the company's internal stability and strategic direction. Mira Murati, a veteran of OpenAI and a key figure in launching groundbreaking products like ChatGPT and DALL-E, announced her exit after six and a half years. Following her departure, two more executives, VP of Research Barret Zoph and Chief Research Officer Bob McGrew, also left the company, creating a notable leadership gap. 

Yet this happened days before the funding round and seems to have done little to deter investors. That is because this year has been filled with impressive growth for OpenAI. 

Its ChatGPT platform now boasts over 200 million weekly active users—a figure that has doubled in just one year. This surge can be attributed to the company's relentless pursuit of innovation, as well as its strategic partnerships with major corporations. As the tech landscape continues to evolve, how OpenAI manages its internal changes will be critical to its long-term success.

The company has also penetrated the corporate world at an unprecedented scale, with an astounding 92% of Fortune 500 companies now utilising its offerings. This shift reflects a growing trend among businesses to integrate AI into their operations, highlighting the changing landscape of work in the digital age. 

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The recent partnership with PwC is particularly noteworthy; it positions PwC as both the largest user and the first official reseller of ChatGPT Enterprise. Over 100,000 employees across PwC's US and UK firms will now have access to ChatGPT Enterprise's advanced capabilities, further solidifying OpenAI’s role in transforming traditional business processes.

Moreover, OpenAI’s commitment to constant innovation has allowed it to maintain a competitive edge. The introduction of features like GPT-4o mini, a more efficient offshoot of its flagship model, and the unveiling of SearchGPT—a new AI-powered search feature—illustrates OpenAI's ambition to expand beyond its original boundaries. 

The road ahead

With companies like Microsoft investing heavily in OpenAI and others like Amazon backing rivals, the landscape is becoming increasingly competitive. Yet OpenAI's ability to gain large interest shows that many in the tech industry see it as a winner. 

Thrive Capital, which committed about US$1.2bn from a combination of its own fund and a special purpose vehicle for smaller investors, negotiated the option to invest another US$1bn next year.

This is dependent on if OpenAI hits a revenue goal, sources close to the deal claimed. Yet with such a vote in confidence, and extra funds, mean that this may not even be the ceiling for OpenAI.

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