Update to note that the Microsoft investment closed in January. Separate from that is the VC money reported here, as part of a takeover bid.
Open AIthe startup behind the widely used conversational AI model ChatGPT has found new backers, TechCrunch has learned.
Venture capital firms such as Tiger Global, Sequoia Capital, Andreessen Horowitz, Thrive and K2 Global are acquiring new shares, according to documents seen by TechCrunch. A source tells us that Founders Fund is also investing. In total, VCs have invested just over $300 million at a valuation of $27-29 billion. This is separate from a big investment from Microsoft announced earlier this year, a person familiar with the development told TechCrunch, which closed in January. The size of Microsoft’s investment is estimated to be around $10 billion, a figure we confirmed with our source.
If all of that is correct, that’s the close of the Wall Street Journal’s tender offer. reported was under construction in January. We’ve confirmed that’s when the talks started, amid a surge of viral interest in OpenAI and its business.
We have reached out to the investors named here, as well as OpenAI, for comment and will update this story as we learn more. OpenAI declined to comment on the tender offer, which is separate from Microsoft’s investment that closed in January.
While Microsoft’s investment comes with a strong strategic angle — the tech giant is working to integrate OpenAI’s technology into a number of areas of its business — VCs step in as backers of funds.
From what we understand, the term sheets have been signed by the investors and the money has been transferred; yet to come is OpenAI’s countersignature. The plan was to make this investment public next week.
In total, outside investors now own more than 30% of OpenAI, the source said.
According to data from PitchBook, it appears that Peter Thiel had been a backer before, but it appears to be the first time that Founders Fund will invest; K2 Global, a one-partner firm, Ozi Amanat, and Thrive are also the startup’s earliest backers. Based on data from PitchBook, it appears that Sequoia, A16Z and Tiger Global were previous investors in the company.
A number of companies, including Tiger and Sequoia, have taken a beating as a result of the financial crisis the tech sector experienced last year. In general, a number of venture capitalists have massively slowed their pace of investment, sitting on what is called “dry powder” waiting for a better climate, and perhaps better opportunities.
So, at a time when investors are looking for interesting AI startups to supportOpenAI is probably seen as the kind of opportunity that looks good right now.
“They’re probably trying to use this (funding) to say hey look, we found a golden apple,” a source said of the decision to back OpenAI here and now. “Venture is a very strange place where anything can happen. You can get big again, then big again, at any time.
OpenAI has an army of technical teams working in various fields, but the area that has been getting a lot of attention lately is GPT, short for Generative Pre-trained Transformer, which is the OpenAI family of large language models used by third parties by API way.
There’s also ChatGPT, the generative AI service that OpenAI released in late November 2022 based on GPT that lets anyone type a natural question and get a compelling, detailed answer. ChatGPT has been a certifiable success, with more than a billion visitors to its website in February, according to SimilarWeb – and that does not include those who use this technology through third parties.
Generative AI is all the rage right now, but OpenAI has its controversies too, with many focusing on that hot, consumer-facing ChatGPT product. People wondered if he was lying, if he was a “virus”, how he handled privacy, if he could be manipulated into being toxic or committing defamation; and following so many others rushing into AI development, even the very nature of how OpenAI’s GPT brand will be “open” in the longer term has been the subject of discussion.
In all honesty, OpenAI has recognized the work that still needs to be done, and in the meantime it has continued to develop services and iterate. In February, the startup introduced a paid version of ChatGPT, called ChatGPT Plus with a faster user experience. It was upgraded to the multimodal LLM GPT-4 in March.
The key to the proposition, the valuation of OpenAI, and likely investor interest is that alongside the technology, there is also a rapidly developing ecosystem around this technology.
In addition to the hundreds of millions of people who have played with ChatGPT, hundreds of companies large and small have started to deploy GPT and ChatGPT in their products and services. It’s also been a boost for other big tech companies to accelerate the rollout of their own generative AI efforts. Google launched Bard and Meta also introduced llama to take on GPT with its proprietary LLM.
OpenAI, however, has a certain undeniable gravity amidst the competition, not least because of its singular focus on the AI space since its founding in 2015. It was even then that it underwent significant changes, including shifting from its original non-profit model. . We don’t Really whether AI will precipitate the seismic shift many are saying, but as one person said: OpenAI may be the closest thing we have to a winner in the space right now.
“We’ve been working on this for so long, but it’s with gradually growing confidence that it’s really going to work,” co-founder and CEO Sam Altman said at an AI conference earlier this month. “We (build) the company for seven years. These things take a long time. I would say roughly in terms of why it worked while others didn’t: it’s just because we’ve been sweating every detail for a long time. And most people aren’t willing to do that.
In addition to ChatGPT, OpenAI has its AI-based image generation tool called Dall-E which received a major update in July last year. It also has the Whisper AI voice recognition model.
Microsoft’s efforts have included integrating OpenAI’s APIs with its Azure infrastructure to support model computation requirements. It also announced in March a GPT-4 integration to supercharge Bing, part of Microsoft’s longstanding effort to reduce the dominance of Google’s search services.
