OpenAI's investor terms

OpenAI’s latest $6.6B funding round comes with requests for its investors, Google begins its wide rollout of ads in AI Overview, and more...

Author

Loryn Chen
October 04, 2024

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Good morning!

Can’t believe we’re already in the last quarter of 2024. Why does time keep getting faster every year?! Anyway, here’s what’s in today’s issue:

  • OpenAI’s private request to its investors in its latest $6.6B funding round

  • Google begins a wide rollout of ads in AI Overview

  • Epic Games files another lawsuit

  • Plus other tech news you need to know

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Insight

OpenAI’s investor terms

Context

This week, OpenAI raised $6.6B in the largest venture capital deal of all time, valuing it at $157B. Investors included Thrive Capital (lead investor), Microsoft, Nvidia, SoftBank, Khosla Ventures, Altimeter Capital, Fidelity, Tiger Global, and MGX. 

It also secured an additional $4B revolving credit line with JPMorgan Chase, Citi, and others. The line can be accessed over 3 years, it can be increased by another $2B, and has a 6% annual interest rate.

Yeah… this could potentially be a whopping total of$12.6B in fresh capital 🤯 over the next 3 years.

OpenAI’s request to investors

As part of its $6.6B funding round, OpenAI requested its venture capital investors like Thrive Capital, Tiger Global, and SoftBank to avoid funding these 5 competitors:

  • Anthropic

  • Elon Musk’s xAI

  • OpenA’s co-founder Ilya Sutskever’s new AI company, Safe Superintelligence (SSI)

  • Perplexity

  • Enterprise search firm Glean

But, these investors aren’t contractually bound to follow OpenAI’s request, and there are no penalties for investing in competitors. However, doing so could harm their relationship with the AI company. 

In the past, avoiding such rival investments was normal. But nowadays, more investors are increasingly funding rival AI businesses as a way to hedge their bets.

This poses a challenge for investors like Altimeter Capital, which has invested in Perplexity, and SoftBank, which also contributed to Perplexity’s $3B valuation round.

How this hurts OpenAI’s competitors

If investors comply with OpenAI's request, it would eliminate these capital-rich firms as funding options for competitors, who already have a limited pool of investors for their massive funding rounds.

Similarities with Uber and Lyft

Uber made a similar request to its investors, preventing them from funding its rival, Lyft, while it was still a private company. Lyft also implemented the same strategy.

Bottomline

It’s uncertain if OpenAI’s investors will comply with the request. This could ultimately backfire for the company though, as it can suggest that it’s vulnerable and needs such demands to succeed, helping strengthen the case for its rivals.

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News

Top hits

  • Google begins its wide rollout of ads in its AI Overviews section of search results in an effort to keep users from shifting to alternatives like ChatGPT, Perplexity, or Claude. 

  • Epic Games filed another lawsuit against Google as well as Samsung, accusing them of illegally conspiring to block access to 3rd-party app stores. This comes less than a year after winning a multimillion-dollar legal battle over Google.

  • OpenAI, at its annual DevDay conference, announced 4 major innovations:

    • Vision Fine-Tuning

    • Realtime API

    • Model Distillation

    • Prompt Caching

Other news

Deal flow

  • OpenAI raised a record $6.6B at a $157B valuation in its most recent round, led by Thrive Capital, and secured a $4B revolving credit line with JPMorgan Chase, Citi, Goldman Sachs, and others. The line can be accessed over 3 years, increased by $2B, and has a 6% annual interest rate.

  • OpenAI raised a record $6.6B at a $157B valuation in a round led by Thrive Capital.

  • Cisco is set to invest in CoreWeave, a cloud-computing provider, as part of a transaction that would value the company at $23B. If you’re curious about CoreWeave, I made a short video about it earlier this year 😉.

  • ElevenLabs, a startup that makes AI tools for audio applications, is being approached by existing and new investors about a new round, which could value it as highly as $3B.

  • AirOps, a platform for AI-based marketing content, raised a $15.5M Series A round.

  • AI coding startup Poolside raised a $500M Series B at a $3B valuation led by BCV.

  • Vizit, a visual AI startup for e-commerce raised a $25M Series B led by Industry Ventures. 

  • Pallet, a unified transportation and warehouse management system, raised an $18M Series A round.

  • Harmonic Security, a San Francisco, CA-based company providing tools to protect sensitive data, raised a $17.5M Series A round.

  • StandardAero, the aircraft maintenance services provider raised $1.44B in an upsized IPO.

  • Impulse Space, an in-space transportation services startup, raised a $150M Series B round led by Founders Fund.

  • 11x.ai, an AI-powered sales bots developer, raised a $50M Series B round led by a16z, valuing it at around $350M.

  • Rogo, a GenAI financial services platform, raised a $18.5M Series A round led by Khosla Ventures.

  • DocJuris, an AI contract review startup, raised an $8M Series A round led by Silverton Partners.

  • Thread AI, a composable AI infrastructure platform for enterprises, raised a $6M Seed round.

  • Boeing, the aerospace and defense company, is considering raising $10B in new shares as it works to bolster cash reserves depleted by an ongoing strike.

Closing

That’s a wrap

That’s it for this week. I hope you found this insightful. As always, let me know what you think and if you have any questions. Cheers!

🌜 Loryn from Dark Mode Digest

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