Sept 13 (Askume) – OpenAI’s new funding round is expected to be in the form of convertible notes, with its $150 billion valuation dependent on whether the ChatGPT-maker can change its corporate structure and remove profit limits for investors.
Details of a previously undisclosed $6.5 billion financing terms reveal just how close the world’s most valuable artificial intelligence startup is to OpenAI, a research-based nonprofit pioneering artificial general intelligence (AGI), willing to make a number of structural changes to attract more investment for its costly pursuit of artificial intelligence beyond human intelligence.
Given OpenAI’s rapid revenue growth, this large-scale funding round has received strong demand from investors and is expected to be completed within the next two weeks, sources said.
Existing investors including Thrive Capital, Khosla Ventures and Microsoft (MSFT.O) are also expected to participate. New investors including Nvidia (NVDA.O) and Apple (AAPL.O) also plan to invest. Sequoia Capital is also in talks to return as a returning investor.
If the restructuring is unsuccessful, OpenAI would have to renegotiate its valuation with investors, at which point their shares would be converted and the number could be lower, the sources told Askume on condition of anonymity.
OpenAI declined to comment.
Removing the profit cap would require approval from OpenAI’s nonprofit board, which includes CEO Sam Altman, entrepreneur Bret Taylor and seven other members.
Sources confirmed media reports that the company has also held discussions with lawyers about converting its nonprofit structure into a for-profit company, as rivals such as Anthropic and XAI are doing.
It’s unclear whether such a fundamental change to the company’s structure will occur. Removing the profit cap limits the potential returns for investors in OpenAI’s profitable subsidiaries, which should lead to a big win for early investors.
It could also raise questions about OpenAI’s governance and separation from its nonprofit mission. OpenAI said the ban is intended to “encourage research, development, and deployment of AGI while maintaining a balance between commerciality and safety and sustainability, rather than focusing solely on maximizing profit.”
This San Francisco-based artificial intelligence laboratory was founded in 2015 as a non-profit research project with the goal of creating artificial intelligence for the benefit of mankind. It is currently controlled by a non-profit parent organization.
This has accelerated commercialization by selling subscription-based services to consumers and enterprises such as ChatGPT, which currently has over 200 million users.
Existing investors will be subject to certain limits on investment returns, and any excess returns will have to be donated to non-profit organisations.
In OpenAI’s first round of funding, investor compensation was set at 100 times the investment amount. “We expect lower price-to-earnings ratios in future rounds,” the company said in a 2019 blog post detailing the structure.
OpenAI has used this model to raise more than $10 billion in funding in recent years, mostly from Microsoft. It was last valued at $80 billion in a tender offer in February when it sold existing shares in a round led by Thrive Capital.
