OpenAI fundraising set to catapult startup's valuation to $150 billion

By Rachel Metz, Ed Ludlow, Gillian Tan and Mark Bergen

OpenAI is in talks to raise $6.5 billion from investors at a valuation of $150 billion, according to people familiar with the situation. 
 

The new valuation, a figure that doesn’t include the money being raised, is significantly higher than the $86 billion valuation from the company’s tender offer earlier this year, and cements its place as one of the most valuable startups in the world. 

At the same time, OpenAI is also in talks to raise $5 billion in debt from banks in the form of a revolving credit facility, said one of the people, all of whom asked not to be identified discussing private information. 
 

The startup declined to comment. The people familiar with the deal noted that the discussions are still ongoing and the terms could change. 
 

The funding round is slated to be led by Thrive Capital, Bloomberg previously reported. Thrive declined to comment on the latest valuation. Microsoft Corp., the company’s largest investor, is also set to participate, and Apple Inc. and Nvidia Corp., have been in talks about investing. 
 

OpenAI is not the first major tech startup to turn to Wall Street banks for a revolving credit facility. A slew of technology companies, including Facebook — now Meta Platforms Inc. — Alibaba Group Holding Ltd., Uber Technologies Inc. and DoorDash Inc. have tapped Wall Street for credit lines before pursuing an initial public offering, often in part to strengthen banking relationships. Historically, companies tend to reward banks that make big credit commitments with roles on their IPOs. In return, lenders sometimes offer better terms on the financing.
 

Founded in 2015, OpenAI has been at the center of the technology industry’s rapid shift toward AI, kicking off an investing frenzy with the 2022 debut of its easy-to-use chatbot, ChatGPT. The company’s products, which can generate realistic images and human-sounding text from just a few words of prompting, have captured the attention of both consumers and investors.

OpenAI has evolved significantly as a company since its founding. Late last year, it briefly ousted its Chief Executive Officer Sam Altman. Today, only a handful of the original founding team remains, and the company has taken steps to overhaul its board of directors and add to its executive ranks. 
 

In a memo to employees last month, OpenAI Chief Financial Officer Sarah Friar said the financing will support the need for computing power and other operating expenses, Bloomberg reported. She also said in the memo that the startup is aiming to allow employees to sell some of their shares in a tender offer later this year. 
 

--With assistance from Katie Roof.
 

(Adds context on financing starting in the sixth paragraph.)
 

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