6.6 billion for OpenAI: The largest VC round of all time

OpenAI is considered one of the most important startups in Silicon Valley. Now it also has a corresponding rating – and that comes with some risks.

OpenAI, one of the most important startups in Silicon Valley at the moment, has closed a financing round of $6.6 billion. Frontman Sam Altman's company is now valued at $157 billion. This valuation makes OpenAI one of the most valuable startups in the world, comparable to Elon Musk's SpaceX and ByteDance, the parent company of TikTok. The round is led by Thrive Capital, with existing investors including Ark Venture Fund, Tiger Global and Microsoft. New investors are the chip giant Nvidia and the Japanese mega fund Softbank.

The round comes at a turbulent time for the startup. Last week, Chief Technology Officer Mira Murati left the company, signaling internal tensions as OpenAI plans to become a for-profit company. OpenAI's Kevin Weil told Business Insider that the startup continues to have a “great team.” At the same time, competitors like Anthropic and Perplexity are positioning themselves as companies that put their mission above profit.

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Employees should be able to cash out

So more departures could follow, as OpenAI is reportedly working to allow its employees to sell their shares in the company. Sarah Friar, chief financial officer of OpenAI, said in a company memo that the company has the option to offer a tender event to provide a liquidity option to qualified employees. Friar added that the company is still working out details and will share information with employees later.

But even OpenAI's impressive rating is just a rating. Silicon Valley has a long list of startups that have raised money at high valuations that have proven difficult to sustain. One example is fintech company Stripe, which was valued at nearly $100 billion in 2021, only to see its valuation decline amid an industry downturn. One Stripe investor reportedly even offered to buy out the shares of other investors who wanted liquidity.

As of now, it would be the second-largest US IPO

With a valuation of $157 billion and the current regulatory environment surrounding AI and Big Tech, an acquisition of OpenAI is almost impossible. That leaves the public markets, which, however, also represent a major challenge: If OpenAI were to go public tomorrow at this value, it would be the second-largest American IPO based on the initial valuation – right behind Alibaba, which went public in September 2014 with a value of 169.4 Billion dollars went public. Brad Gerstner of Altimeter Capital, an investor in OpenAI, said at a conference that he hopes and expects that the next step for OpenAI will be to go public.

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More than 5 billion in loss – when will OpenAI founder Sam Altman run out of money?

Even if the IPO market can overcome its current doldrums, the question remains whether AI is just a bubble waiting to burst. It is at least as difficult to make a profit with the technology, which is expensive to develop and maintain. OpenAI will reportedly lose up to $5 billion this year. On the other hand, if OpenAI can maintain its position as a leading AI application and the industry is as transformative as some believe, an investment at a $157 billion valuation could prove to be a bargain.