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ChatGPT Maker OpenAI Raises $6.6 Billion in Fresh Funding as It Moves Away From Its Nonprofit Roots
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By Associated Press
Published 9 months ago on
October 2, 2024

OpenAI secures massive $6.6 billion funding round, signaling a shift towards a for-profit model and intensifying AI competition. (AP File)

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OpenAI said Wednesday it has raised $6.6 billion in venture capital investments as part of a broader shift by the ChatGPT maker away from its nonprofit roots.

Led by venture capital firm Thrive Capital, the funding round was backed by tech giants Microsoft, Nvidia and SoftBank, according to a source familiar with the funding who was not authorized to speak about it publicly.

The investment represents one of the biggest fundraising rounds in U.S. history, and ranks as the largest in the past 17 years that doesn’t include money coming from a single deep-pocketed company, according to PitchBook, which tracks venture capital investments.

Microsoft’s Significant Investment in OpenAI

Microsoft pumped up OpenAI last year with a $10 billion investment in exchange for a large stake in the company’s future growth, mirroring a strategy that tobacco giant Altria Group deployed in 2018 when it invested $12.8 billion into the now-beleaguered vaping startup Juul.

OpenAI said the new funding “will allow us to double down on our leadership in frontier AI research, increase compute capacity, and continue building tools that help people solve hard problems.” The company said the funding gives it a market value of $157 billion and will “accelerate progress on our mission.”

OpenAI’s Shift Towards For-Profit Model

The influx of money comes as OpenAI has been looking to more fully convert itself from a nonprofit research institute into a for-profit corporation accountable to shareholders.

While San Francisco-based OpenAI already has a rapidly growing for-profit division, where most of its staff works, it is controlled by a nonprofit board of directors whose mission is to help humanity by safely building futuristic forms of artificial intelligence that can perform tasks better than humans.

That sets certain limits on how much profit it makes and how much shareholders get in return for costly investments into the computing power, specialized AI chips and computer scientists it takes to build generative AI tools. But the governance structure would change if the board follows through with a plan to convert itself to a public-benefit corporation, which is a type of corporate entity that is supposed to help society as well as turn a profit.

Major Investors and Industry Reactions

Along with Thrive Capital, the funding backers include Khosla Ventures, Altimeter Capital, Fidelity Management and Research Company, MGX, ARK Invest and Tiger Global Management.

Microsoft said in a brief statement Wednesday that it looks forward to continuing its OpenAI partnership. Nvidia, a leading designer of the chips needed to build and run AI systems, declined to comment. The amount of each funder’s investment has not been disclosed.

Not included in the round is Apple, despite speculation it might take a stronger interest in OpenAI’s future after recently teaming up with the company to integrate ChatGPT into its products.

Brendan Burke, an analyst for PitchBook, said that while OpenAI’s existing close partnership with Microsoft has given it broad access to computing power, it still “needs follow-on funding to expand model training efforts and build proprietary products.”

Burke said it will also help it keep up with rivals such as Elon Musk’s startup xAI, which recently raised $6 billion and has been working to build custom data centers such as one in Memphis, Tennessee. Musk, who helped bankroll OpenAI’s early years as a nonprofit, has become a sharp critic of the company’s commercialization.

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