OpenAI’s latest round of funding could be a bargain or a flop

OpenAI is seen as one of the most important startups in Silicon Valley. Now it has the right price.

The well-known startup announced the closing of a $6.6 billion funding round that values ​​it at $157 billion. It is the largest-ever VC round and makes OpenAI one of the most valuable startups in the world, alongside Elon Musk’s SpaceX and ByteDance, TikTok’s parent company.

So who was investing?

Josh Kushner’s Thrive Capital is leading the round. Regular investors include Cathy Wood’s Ark Venture Fund, Chase Coleman’s Tiger Global and OG backer Microsoft OpenAI. New faces include chip giant Nvidia and Masayoshi Son’s SoftBank. Here complete failure of supporters.

The big news comes amid broader confusion at the start. Last week, Chief Technology Officer Mira Murati became the latest executive to leave the company. This was accompanied by news of OpenAI’s plans to transform into a for-profit corporation.

(OpenAI expert Kevin Weil told Business Insider’s Rob Price about the startup still has a “great bench.””, so that’s it.)

Meanwhile, OpenAI rivals such as Anthropic and Perplexity they present themselves as people who put mission above profits. More exits may be coming as OpenAI is reportedly working on enabling its employees to sell their shares in the company.

It’s important to remember that OpenAI’s staggering valuation is just that… a valuation.

Silicon Valley has a long list of successful startups that have raised money at massive valuations that have proven difficult to sustain.

Take fintech Stripe, which was valued at nearly $100 billion at its peak in 2021 and has seen its valuation slashed amid the industry downturn. Even as the company recovers, one of its backers has reportedly offered to buy investors’ own shares in the startup who want liquidity.

Which brings us back to OpenAI’s $157 billion valuation. At this size and with the current regulatory environment around AI and Big Tech, an acquisition is almost certainly out of the question. That leaves public markets with another difficult task.

If OpenAI were to go public tomorrow at that value, it would be the second-largest U.S. IPO at initial valuation, trailing only Alibaba, which went public in September 2014 at a price of $169.4 billion.

“I hope and expect that the next step for OpenAI will be to go public” – Brad Gerstner of Altimeter Capital, who is an investor in OpenAI, he said at Wednesday’s conference.

But even if the IPO market manages to shake off its current drought, questions remain about whether it will AI is just a bubble waiting to burst. At the very least, profiting from technology that is expensive to build and maintain is proving difficult for almost anyone. OpenAI will reportedly lose the same amount to $5 billion this year.

On the other hand, if OpenAI maintains its position as a popular AI application and the broader industry transforms as some believe, achieving a $157 billion valuation could be a bargain.

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Insider Today Team: Dan DeFrancesco, deputy editor and anchor in New York. Hallam Bullock, senior editor, in London. Jordan Parker Erb, editor, in New York. Milan Sehmbi, colleague, in London. Amanda Yen, colleague, in New York.