Abstract:
According to news on October 31, the Financial Times quoted multiple people familiar with the matter as reporting that ChatGPT developer OpenAI has lowered its latest round of financing target from US$30 billion to approximately US$20 billion, and the proposed valuation has also been reduced from the previous US$1.4 trillion to US$1.25 trillion.
The Wall Street Journal subsequently disclosed that OpenAI currently has investment commitments of approximately US$11 billion, less than half of its original goal. The company has informed shareholders that it will continue to raise capital in the coming weeks in an effort to attract family offices and high-net-worth individuals. According to the Financial Times, OpenAI declined to comment.
First lower the valuation, then cut the financing target
According to the Financial Times, when OpenAI introduced this round of financing to investors last month, it described it as the company’s last opportunity to invest before going public next year. With revenue accelerating since July this year as a support, OpenAI set a valuation of US$1.4 trillion.
However, as negotiations progressed, the company successively lowered its asking price and financing targets. The Information said that OpenAI had first lowered its proposed valuation to US$1.25 trillion last week, and now it has cut its planned fundraising amount by US$10 billion. The Financial Times also revealed that some investment institutions have reduced their subscription quotas; the company has set the deadline for the first batch of investment commitments on October 30, local time, and the scale of the first round of delivery is expected to be less than US$20 billion.
On March 31 this year, OpenAI just announced the completion of a round of financing with an investment commitment of US$122 billion, with a post-investment valuation of US$852 billion at the time.
At present, many leading institutions are still negotiating and following up. According to the Financial Times, a consortium including MGX, the UAE government-backed technology investment institution, is expected to become the largest investor in this round; established institutions such as SoftBank, Sequoia Capital, Coatue, Founders Fund and Andreessen Horowitz (a16z) also plan to participate.
This investment is also directly linked to the supply of computing power. According to the above report, as part of the transaction conditions, OpenAI will have the option to rent new local computing power in the United Arab Emirates. For OpenAI, the introduction of these investors can not only supplement book funds, but also help broaden subsequent sources of computing power.
Want to lock in funds before Anthropic goes public
Reuters reported on October 19 that OpenAI was rushing to advance this round of financing partly to lock in funds before its old rival Anthropic’s IPO expected to be held in November. Since the two companies are in contact with a similar group of investors, some institutions have also interpreted OpenAI's actions as a "jump start": to collect the money for themselves before the funds flow to Anthropic's public listing.
Right now, Anthropic has made public its listing documents, but OpenAI is still adjusting the price of private financing. The two giants are competing head-on not only for users of large models, but also for investors' funds and attention. For the same fund, whether to increase its position in OpenAI will inevitably have to be weighed against the new opportunity to participate in Anthropic.
At the same time, the trend of the secondary market has also changed. The Financial Times quoted an OpenAI investor as saying that when this round of financing was first launched, the market was still quite enthusiastic about AI investment, but the subsequent sharp decline in technology stocks disrupted the rhythm. On October 30, local time, the Nasdaq 100 Index fell approximately 3.5% in a single day. The Wall Street Journal pointed out that investors are now becoming more picky and are much more cautious than before, no matter which AI company they invest in or at what price they pay.
But OpenAI still needs to raise money for huge computing power and infrastructure commitments. Reuters previously quoted investors familiar with the company as saying that additional funds can also help the company buffer the risk of the secondary market turning cold and the original listing plan in 2027 being forced to be further postponed. OpenAI stated in its March financing announcement that continued access to computing power will help advance research, improve products, expand service coverage, and reduce the cost of providing services on a large scale.
OpenAI has had precedent in raising funds from wealthy individual investors before. The company disclosed in March this year that it had attracted more than US$3 billion in individual investments through banking channels. The Financial Times stated that OpenAI also plans to open subscriptions to high-net-worth individuals in the subsequent stages of this round and continue to raise funds at a valuation of US$1.25 trillion, which may push the entire round of financing to approximately US$20 billion.
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