OpenAI secures massive $6.6 billion funding round, valuing company at $157 billion

ChatGPT creator, OpenAI, has successfully closed a funding round worth $6.6 billion. This latest investment, led by Microsoft and Nvidia, propels OpenAI's valuation to a staggering $157 billion, solidifying its position as one of the most valuable private companies globally.

The funding round saw participation from returning investors such as Thrive Capital and Khosla Ventures, alongside new entrants like Altimeter Capital, Fidelity, SoftBank, and Abu Dhabi’s state-backed MGX. While Apple was rumored to be considering an investment, the tech giant did not ultimately participate in the funding round.

Executive Changes and Corporate Restructuring

The fresh capital injection arrives amid significant structural and leadership changes at OpenAI, including the departure of longtime Chief Technology Officer Mira Murati. The company is currently undergoing a complex restructuring to transform it into a for-profit entity, removing the nonprofit board's control and lifting the cap on investor returns.

Investors in this round have been given some assurances, including clawback clauses, should the restructuring not occur within two years.

OpenAI’s Chief Financial Officer Sarah Friar also informed employees that they would have the opportunity to cash out their shares through a tender offer following this funding round, although specifics on timing are yet to be determined. This follows a previous opportunity earlier this year for employees to cash out their shares at a valuation of $86 billion.

Terms of investment

The funding was provided in the form of convertible notes, which will convert to equity upon a successful structural change into a for-profit entity.

On its end, OpenAI has imposed restrictions on its investors, prohibiting them from investing in five other AI companies perceived as rivals. These companies include Anthropic, Musk’s xAI, Perplexity, Glean, and Safe Superintelligence (SSI). The last one was created by OpenAI's co-founder Ilya Sutskever.

New line of credit

In addition to the funding round, OpenAI has secured a $4 billion revolving line of credit, further bolstering its financial position. This brings the company's total liquidity to over $10 billion.

“This means we now have access to over $10 billion in liquidity, which gives us the flexibility to invest in new initiatives and operate with full agility as we scale,” OpenAI wrote in a Thursday blog post.

The AI unicorn is on track to generate $3.6 billion in revenue this year, albeit with mounting losses exceeding $5 billion. However, the company anticipates a substantial revenue jump to $11.6 billion in the coming year.