OpenAI receives fresh money from Microsoft, Nvidia & Co
A group of investors including Microsoft and Nvidia gives OpenAI 6.6 billion dollars. But OpenAI has to give up its soul in return.
(Image: Camilo Concha / Shutterstock.com)
OpenAI receives 6.6 billion US dollars from investors in the form of a convertible bond. Converted to the entire company, this corresponds to a company valuation of 157 billion dollars. This is a good 80 percent more than the 86 billion dollars raised in the last financing round and makes the AI developer one of the most valuable, non-governmental and non-listed companies in the world. However, the investor group has set conditions that will lead to fundamental upheavals. In particular, OpenAI must abandon its founding principle of non-profit status.
The largest investor in this round is the New York-based venture capitalist Thrive Capital, which according to media reports is throwing 1.25 billion dollars into the pot. Thrive Capital has also negotiated a special clause: It may subscribe to another convertible bond for one billion dollars next year at the same company valuation, provided OpenAI reaches a certain sales target. So far, OpenAI's turnover has been growing at a meteoric rate, but its expenditure is much higher.
Microsoft has provided almost one billion dollars in fresh money, which means that the data company has probably invested a total of around 14 billion dollars in OpenAI. Other prominent investors in the current round are Softbank (half a billion dollars) and Nvidia (100 million dollars). According to reports, the Emirate of Abu Dhabi (MGX), Altimeter Capital and Fidelity are also involved, while Apple has decided against investing in OpenAI.
The conditions
OpenAI must give up its non-profit status. The previous non-profit board of directors will lose its control and may only exercise the voting rights associated with a minority share. Previously existing limits on profit participation by the owners no longer apply. Due to the lack of profit, they have played no practical role to date, but were of fundamental importance for the self-image of the project.
If the conditions are met, investors can convert their bonds into shares, which would correspond to more than 4 percent of all shares. If OpenAI fails to meet the conditions within two years, the bond subscribers can ask for their money back or try to negotiate a larger block of shares. In other words, OpenAI would then be valued lower.
The company needs the billions to cover billions in negative cash flow, as well as for an offer to its own employees: they receive part of their salary in shares, which are not publicly traded. Certain employees were able to sell their shares to OpenAI a few months ago, at a company valuation of 86 billion dollars. Following the conclusion of the current financing round, the management would like to make a new offer to more employees, at the significantly higher price.
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