The creator of the popular chatbot ChatGPT is looking to raise $6.5 billion from investors, along with an additional $5 billion in debt through a revolving credit facility from banks, according to sources familiar with the discussions.
This new valuation represents a 74% increase from the $86 billion it achieved in a tender offer earlier this year.
OpenAI has not yet responded to Reuters' request for comments, and Thrive Capital, which Bloomberg previously indicated would lead the funding round, also refrained from commenting. The excitement generated by ChatGPT has positioned OpenAI as a key player in the artificial intelligence sector.
Under the leadership of Sam Altman and with the support of tech giant Microsoft, the company has reignited interest in the field within Silicon Valley.
Additionally, Forge Global Holdings, a marketplace for private securities, has recently included OpenAI in its "Private Magnificent Seven" list, which features a selection of major publicly traded stocks such as Microsoft, Apple, Google-parent Alphabet, and Tesla.
The recent influx of capital will enable OpenAI to maintain its private status for an extended period. Many high-profile startups are opting against going public due to the burdensome regulatory expenses and the unpredictable nature of stock markets.
Alternative funding sources, including private equity firms and investment vehicles like Destiny Tech100 and ARK Venture Fund, have further diminished the attractiveness of initial public offerings.
Nevertheless, investors appreciate the liquidity that public markets provide. Chelsea Childs, a partner at the law firm Ropes & Gray, noted, "Venture capitalists will seek liquidity, which can be achieved through either a sale of the company or an IPO."
Established in 2015, OpenAI has been pivotal in the technology sector's swift transition towards artificial intelligence, igniting a wave of investment following the launch of its user-friendly chatbot, ChatGPT, in 2022.
The company's offerings, capable of producing lifelike images and human-like text from minimal prompts, have garnered significant interest from both consumers and investors alike.
Since its inception, OpenAI has undergone considerable transformation; it briefly replaced its CEO Altman late last year, and only a few of the original founding members remain today. In a recent memo to staff, CFO Sarah Friar indicated that the new funding will address the demand for computing resources and other operational costs, as reported by Bloomberg.
She also mentioned plans for a tender offer later this year, allowing employees to sell a portion of their shares. Additionally, the startup has entered into several agreements with media companies, including Axel Springer and Conde Nast, to integrate their content into its AI offerings.
However, it has also encountered significant legal challenges, including a major copyright lawsuit from The New York Times last year regarding the use of its articles, as well as two separate lawsuits initiated by one of its founders, tech billionaire Elon Musk, who left OpenAI in 2018.