- Thrive Capital invests over $1 billion in OpenAI′s $6.5 billion round, with an exclusive option for an additional $1 billion next year if revenue targets are met.
- OpenAI′s valuation could hit $1150 billion, contingent on restructuring to boost efficiency and shareholder returns, while attracting tech giants and venture capitalists.
OUR TAKE
Thrive Capital’s substantial investment in OpenAI, alongside the unique clause for future investment, signals robust faith in the AI firm’s potential. This move underscores the growing significance of AI in driving corporate innovation and efficiency, positioning OpenAI as a pivotal player in the technology sector’s future. The deal reflects not only Thrive’s strategic foresight but also the market’s readiness for transformative AI solutions.
–Vicky Wu, BTW reporter
What happened
Thrive Capital is committing more than $1 billion to OpenAI’s present $6.5 billion fundraising round, an investment that includes a unique perk not offered to other backers. Sources privy to the details revealed that if OpenAI attains a specified revenue objective, Thrive will have the exclusive right to invest an additional $1 billion next year at the current valuation. OpenAI anticipates its revenue to surge to $11.6 billion in the coming year, a considerable leap from the estimated $3.7 billion in 2024. The sources noted that losses could reach $5 billion this year, heavily dependent on expenditure for computing power, which remains variable. The current funding round, structured as convertible debt, is slated to conclude by the end of next week and could elevate OpenAI’s valuation to $150 billion, reinforcing its position as one of the world’s most valuable private companies.
Achieving this valuation is contingent upon a complex restructuring effort designed to strip the non-profit board of its controlling interest and eliminate caps on investor returns, a strategy initially reported by Reuters. While there is no definite timeline for the restructuring’s completion, the initiative highlights the company’s commitment to improving operational efficiency and enhancing shareholder returns. Thrive Capital, which spearheaded OpenAI’s previous funding round, is contributing $1.2 billion from its own funds and a special purpose vehicle for smaller investors. Other participants in the new round include tech giants Microsoft, Apple, Nvidia, and venture capital firm Khosla Ventures. Unlike Thrive, these entities were not granted the same future investment option at the current valuation.
Also read: OpenAI CEO denies link between executive departures and restructuring
Also read: OpenAI considers restructuring to public benefit firm amid leadership exodus
Why it’s important
The magnitude of Thrive Capital’s investment, coupled with the exclusive clause, underscores the confidence institutional investors have in OpenAI’s growth trajectory. This deal exemplifies the burgeoning importance of artificial intelligence (AI) technologies within the global economy and the belief that OpenAI’s offerings, particularly its flagship product ChatGPT, stand to become integral to corporate operations worldwide. OpenAI’s revenue projections significantly surpass CEO Sam Altman’s earlier forecast of $1 billion in revenue for the current year. The primary sources of income are derived from corporate service sales and subscription stoits chatbot, with ChatGPT expected to generate $2.7 billion in revenue this year, up from $700 million in 2023. The chatbot service boasts roughly $10 million paying subscribers, each paying a monthly fee of $20.
Furthermore, the high valuation and the prospect of additional investment at a potentially discounted rate signal the competitive landscape within the AI sector, where securing early-stage investments can lead to substantial stakes in rapidly scaling companies. For Thrive Capital, the deal represents a strategic move that could allow it to augment its stake in OpenAI if the company continues to meet its ambitious financial targets. The investment also highlights the broader market’s recognition of the transformative potential of AI technologies and the financial rewards they might bring to early investors.
