OpenAI, the company behind the viral ChatGPT chatbot is reportedly in talks with investors to sell existing shares in a tender offer that would value the company at around $29 billion.
According to a WSJ report, venture-capital firms Thrive Capital and Founders Fund are in talks to buy shares from existing shareholders such as employees.
If the deal goes ahead, it would roughly double OpenAI’s valuation from a prior tender offer completed in 2021, when OpenAI was valued at about $14 billion.
OpenAI has generated tens of millions of dollars in revenue, in part from selling its AI software to developers, but some investors have expressed skepticism that the company can generate meaningful revenue from the technology.
Current investors include Microsoft who invested $1billion in 2019 and is said to be in advanced talks to increase its investment. It is also working with OpenAI to incorporate its ChatGPT software into the Bing search engine to challenge Google in the Search Industry.
Semafor reports that Microsoft is set to invest $10 billion. As part of the deal, Microsoft will get a 75% share of OpenAI’s profits until it makes back the money on its investment, after which the company would assume a 49% stake in OpenAI. However, Microsoft and OpenAI have not confirmed the report.
Set up as a non-profit in 2015 with a mission of pursuing AI research for the benefit of humanity, OpenAI established a for-profit arm in 2019 in order to raise more capital to pay for the computing power needed to train its algorithms. Its original backers include billionaire CEO Elon Musk, LinkedIn. Corp. co-founder Reid Hoffman, as well as CEO Sam Altman who was formerly president of venture capital firm Y Combinator.
According to Reuters, the company claims to be generating “tens of millions of dollars” in revenue and believes it is on track to hit $1 billion in annual revenue by 2024.
OpenAI released its viral ChatGPT in November 2022. ChatGPT stands for Chat Generative Pre-trained Transformer, and it is a chatbot developed by OpenAI that optimizes language models for dialogue. The application is built on top of OpenAI’s GPT-3.5 family of large language models, and is fine-tuned with both supervised and reinforcement learning techniques.
