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OpenAI has urged investors to refrain from supporting competing start-ups like Anthropic and Elon Musk’s xAI, as the creator of ChatGPT strives to fend off challengers and preserve its leading position in generative artificial intelligence.
The San Francisco-based organization, under the leadership of CEO Sam Altman, has made it clear that it anticipates an exclusive funding arrangement, according to three individuals familiar with the discussions.
OpenAI is nearing the completion of its latest funding round, totaling $6.5bn, with a valuation of $150bn.
Pursuing exclusive relationships with investors would limit access to capital and strategic alliances for competitors. This approach is likely to heighten existing tensions with rivals, particularly Musk, who is actively suing OpenAI.
Venture capital firms have access to sensitive information about the companies they back, and maintaining close ties with one could complicate or create friction in supporting another competitor.
However, VCs note that exclusivity is rarely a firm requirement, and many top firms have chosen to diversify their investments across various sectors. Notably, Sequoia Capital and Andreessen Horowitz have both invested in multiple AI enterprises, including OpenAI and Musk’s xAI.
OpenAI’s ability to demand unique terms and a substantial valuation stems from investors’ belief that the company could lead the next phase of AI innovation, a transformation that they argue will be as impactful as the advent of the internet or mobile technology.
“When a company has all the leverage, it can compel others to act against their natural inclinations,” commented a partner at a prominent VC firm, who observed that ride-hailing service Uber implemented a similar strategy during its rapid expansion.
Thrive, a venture capital firm established by Josh Kushner, is taking the lead in this funding round and has pledged $1bn.
Multiple investors with insight into the deal indicate that other firms, including early OpenAI supporter Khosla Ventures, SoftBank, and the California Public Employees’ Retirement System (Calpers), are set to invest directly or via special purpose vehicles. Khosla’s vehicle could contribute a total of $500mn or more, according to two sources.
Special purpose vehicles — which allow venture funds to collect capital for specific objectives — were also utilized in recent large funding rounds for AI start-ups Anthropic and xAI, as informed by individuals familiar with these transactions.
OpenAI declined to provide comments. Khosla Ventures and Calpers also chose not to comment.
Strategic investors like Microsoft, Nvidia, and Apple have also considered participating in the funding round in recent weeks, according to individuals well-acquainted with the discussions.
Investors have had to weigh the company’s recent turmoil, including a boardroom coup a year ago that temporarily removed founder Sam Altman. Just last week, chief technology officer Mira Murati announced her unexpectedly departure from the company, representing the latest in a series of high-profile exits this year.
OpenAI is also planning a corporate restructuring that would distance the start-up from its non-profit roots and enable investors to gain a larger share of the profits if the company becomes lucrative.
Altman has engaged in discussions to maintain equity in the company as part of the new fundraising initiatives, despite previously stating he was not interested in owning a stake in the organization.
However, he dismissed claims of receiving a 7 percent equity stake in the new for-profit entity — potentially worth over $10bn — as “absurd” during a staff town hall meeting.
Musk, who co-founded and initially funded OpenAI in 2015 but resigned three years later, filed a lawsuit in August, alleging that the startup has drifted from its original non-profit mission to benefit humanity through a commercial partnership with Microsoft.
Musk accused Altman of “Shakespearean proportions of deceit,” and the lawsuit aims to nullify the Microsoft agreement, which is also currently being investigated by US and European antitrust regulators.