OpenAI, the company behind the popular conversational AI model ChatGPT, has secured new backers in a funding round that is separate from a $10 billion investment by Microsoft, as reported by TechCrunch.
The VC firms that have invested in the round include Andreessen Horowitz, K2 Global, Sequoia Capital, Thrive and Tiger Global. The investors have put in a total of just over $300m, and the valuation of OpenAI is believed to be between $27 billion and $29 billion. According to PitchBook data, several of the VC firms had previously invested in the company. Founders Fund, Tiger and Sequoia are among the VC firms that have backed the firm previously.
The tender offer was reported to be in the works in January and discussions began then. Investors have signed the term sheets and have transferred the money, according to the report. OpenAI declined to comment on the tender offer. VC firms are coming in as financial backers, rather than with a strategic interest in the company. It is believed that this investment will be made public next week, once OpenAI has countersigned the deal.
OpenAI has an array of technical teams that work across various sectors, but it is the Generative Pre-trained Transformer (GPT) that has attracted attention recently. GPT is OpenAI's family of large language models used by third parties via APIs. ChatGPT, the generative AI service that OpenAI released in November 2022, has been a significant success, with over a billion visitors to the website in February 2023, according to SimilarWeb.
The paid version of ChatGPT, called ChatGPT Plus, was introduced in February and was upgraded with multimodal LLM GPT-4 in March. Many businesses have also started using GPT and ChatGPT in their products, and there is a rapidly developing ecosystem around that technology.
Although generative AI is all the rage at present, OpenAI has been controversial, particularly regarding ChatGPT. Many people have questioned whether it lies, if it can be manipulated to be toxic, whether it handles privacy correctly, or if it can commit libel.
The company has acknowledged the work that needs to be done in these areas. Its singular focus on AI since its foundation in 2015 has been central to its success in the space. It has even shifted from its original non-profit model to become a for-profit company. Although it is unclear if AI will trigger the seismic shift that many say it will, OpenAI is the closest thing to a winner in the field at present, according to one source.