OpenAI Raises $300m From Top VC Firms

OpenAI, the company behind the widely used conversational AI model ChatGPT, has secured new backers in a funding round that values the company between $27 billion and $29 billion. The investors include VC firms such as Tiger Global, Sequoia Capital, Andreessen Horowitz, Thrive and K2 Global, who have put in just over $300 million in total. Founders Fund is also believed to be investing.

Top VC Funding Round

Outside investors now own more than 30% of OpenAI. It was reported that Peter Thiel had already been a backer, but it seems that Founders Fund will be investing for the first time. K2 Global, a firm with just one partner, Ozi Amanat, and Thrive are also first-time backers of the startup. From PitchBook data, it appears that Sequoia, A16Z and Tiger Global had been earlier investors in the company.

The funding round follows Microsoft’s investment in OpenAI, announced earlier this year, which is believed to be around $10 billion. While Microsoft’s investment comes with a strong strategic angle, the VCs are coming in as financial backers. OpenAI has an army of technical teams working across a range of areas, but the area that has attracted a lot of attention of late is GPT, short for Generative Pre-trained Transformer, which is OpenAI’s family of large language models used by third parties via APIs.


Billion-Visitor Hit or Controversial Tool?

OpenAI’s ChatGPT, the generative AI service released at the end of November 2022, has been a certifiable hit, with more than 1 billion visitors to its website in February, according to SimilarWeb. However, the product has faced controversy and criticism, with questions raised over whether it lies, whether it is a “virus”, how it handles privacy, if it can be manipulated to be toxic or commit libel, and the nature of how “open” OpenAI’s GPT branding will be longer term.

In addition to the hundreds of millions of people who have played around with ChatGPT, hundreds of businesses large and small have started deploying GPT and ChatGPT into their products and services. OpenAI’s focus on the AI space since its founding in 2015, coupled with its singular focus on the development of the technology, has led some to see it as a potential winner in the space. However, OpenAI has acknowledged that work still needs to be done on the product, and in February introduced a paid version of ChatGPT, called ChatGPT Plus, with a faster user experience.