OpenAI asks investors not to support rivals, like Musk – 10/02/2024 – Tec

OpenAI has urged investors to avoid supporting rival startups such as Anthropic and Elon Musk’s xAI, as it secured US$6.6 billion in new funding and seeks to fend off challengers to its initial leadership. in generative AI (artificial intelligence).

The group led by CEO Sam Altman announced this Wednesday (2) that it concluded its latest fundraising valued at US$150 billion (R$816.4 billion), the highest valuation in the history of Silicon Valley.

During negotiations, the company made clear it expected an exclusive financing deal, according to three people with knowledge of the discussions.

Seeking exclusive relationships with investors restricts rivals’ access to capital and strategic partnerships. The move by the creator of ChatGPT risks inflaming existing tensions with competitors, especially Musk, who is suing OpenAI.

Venture capital firms have access to sensitive information about the companies they invest in, and the close relationship with one company can make it difficult or contentious to also support a rival.

But exclusivity is rarely required, venture capitalists say, and many leading companies have spread their bets across certain sectors. Sequoia Capital and Andreessen Horowitz, for example, have backed several AI startups, including both OpenAI and Musk’s xAI.

OpenAI may command unusual terms and an outsized valuation because investors believe the company can dominate the next wave of AI innovation, which they say will be as significant a shift in consumer behavior as the internet or mobile.

According to one person familiar with the negotiations, the round was so overcrowded that OpenAI said it would give the allocation but would like significant involvement in the business and no commitments to competitors.

A partner at a major venture capital firm noted that ride-hailing app Uber had a similar policy “when it was in total world domination mode,” adding that when a company holds all the cards, it can force people to do things. things unnaturally.

Venture capital firm Thrive was leading the round and had committed US$750 million (R$4 billion) of its own funds, in addition to approximately US$550 million (R$2.9 billion) from its partners, according to a person familiar with the terms.

The company had also maintained an option to invest a further US$1 billion (R$5.4 billion) before the end of 2025 at a valuation of US$150 billion (R$816.4 billion), according to three people close to the matter. .

Chipmaker Nvidia and Microsoft, which has already invested US$13 billion (R$70.7 billion) in OpenAI, also participated in the round. Apple, which was in talks with the company to invest, did not participate.

Other companies, including Khosla Ventures, SoftBank, Tiger Global, Altimeter Capital and the California Public Employees’ Retirement System, invested directly or through special purpose vehicles, according to several people with knowledge of the deal.

Khosla could invest a total of US$500 million (R$2.7 billion) or more, according to two of the people.

SPVs — entities through which venture funds can raise capital for a specific purpose — have also been used as part of large funding rounds for AI startups like Anthropic and xAI in recent months, according to sources.

“The new funding will allow us to reinforce our leadership in frontier AI research, increase computing power, and continue building tools that help people solve difficult problems,” OpenAI said.

The deal almost doubles OpenAI’s valuation from US$87 billion (R$473 billion) less than a year ago, and is five times the level at which investors valued it in April last year.

During the round, investors had to take into account the company’s recent turmoil, including a boardroom coup a year ago in which founder 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 series of senior executive departures this year.

OpenAI is also working on a corporate restructuring that would move the startup away from its origins as a nonprofit and allow investors to capture more of the benefits if the company becomes profitable.

Musk, who co-founded and helped fund OpenAI in 2015 but left three years later, filed a lawsuit in August that alleges the startup abandoned its original nonprofit mission to benefit humanity when it agreed to a business partnership with Microsoft.

Musk accused Altman of “deception of Shakespearean proportions” and the lawsuit seeks to nullify the Microsoft deal, which is also being investigated by U.S. and European antitrust regulators.

Although OpenAI is Silicon Valley’s largest venture capital-backed company, it is surpassed in valuation by China’s ByteDance and Musk’s SpaceX.