news

key points

tencent technology news, august 31, according to foreign media reports, few companies can create such a sensation around the world as openai, and its iconic product chatgpt chatbot has quickly evolved into a phenomenal storm sweeping the world. by mid-2024, chatgpt's users have exceeded 200 million. however, all of this requires huge amounts of money, and openai's fundraising ability is ultimately limited. as financing becomes increasingly difficult, openai may eventually need to go public to survive.

openai is valued at $125 billion?

after weeks of discussions, openai is about to welcome a new round of financing. according to people familiar with the matter, the company's ceo and co-founder sam altman has announced to all employees that a new round of huge financing plans are being prepared in full swing. however, not all investors recognize its latest valuation.

the round, led by thrive capital, is expected to boost openai’s valuation to more than $100 billion, a significant 16% increase from the $86 billion valuation thrive led in its previous employee stock sale.

since the end of 2023, openai's annualized revenue has soared to $3.4 billion. this impressive financial performance has undoubtedly provided strong support for attracting investors. according to reliable sources, the latest financing lineup may include technology giants such as apple and nvidia.

although altman is well-known in the technology industry for his outstanding capital operation ability, it is not easy to raise such a huge amount of funds. some investors have expressed reservations about openai's latest valuation. despite this, there are still rumors in the market that openai's valuation may reach a high of $125 billion.

even if openai's valuation exceeds $100 billion, it is already amazing. currently, only a few private startups in the world can match it, such as bytedance and spacex. in the development of openai, despite altman's good leadership, it has also experienced personnel changes, including the departure of former chief scientist ilya sutskever and co-founder john schulman, who joined competitor anthropic. at the same time, co-founder and president greg brockman is currently on vacation.

the timing of openai's transformation from an alternative nonprofit organization to a for-profit company has attracted much attention. altman once praised openai as "the most capital-intensive startup in silicon valley history," and its extensive funding comes from the strong support of many silicon valley investors. however, with huge operating expenses - mainly used to maintain chatbots, train large language models, and pay salaries to more than 1,500 employees, openai may face a loss of up to $5 billion this year, indicating that it may start private equity financing again in the future.

for thrive capital, the new york venture capital firm led by josh kushner, the stakes are high for high risk, high reward. after all, only a handful of companies make it past the nine-figure valuation threshold, a feat more common in the public markets, where value is determined by a broad range of shareholders rather than a single capital raiser like altman.

although openai has firmly established itself as a leader in the field of artificial intelligence, it still has many hurdles to overcome before it can finally go public. thrive capital is known for focusing on a small number of potential companies and injecting generous capital, as evidenced by its multi-billion-dollar investment in payment giant stripe in 2023. thrive not only led the round of financing itself, but also raised at least $1 billion in additional funds through its exclusive investment vehicle.

although the safety of concentrated investment strategies often sparks external debate, thrive undoubtedly has strong capital to continue to empower openai. earlier this month, the company successfully raised $5 billion to establish two new funds, which is the largest financing action in its history. however, it will take some time to reveal the results of thrive's investment in openai.

why does openai need an ipo?

the world's most highly valued private companies often face the debate of "whether to conduct an ipo", a topic that affects the nerves of investors, financial elites and industry observers. to analyze why these companies may choose to embark on this costly and complicated public listing journey - including expensive legal advice, additional regulatory constraints and frequent interactions with the china securities regulatory commission, in-depth considerations from multiple dimensions are required.

many top private companies have been able to delay going public for a long time due to their unique advantages: they have achieved considerable profits and can buy back employee shares on their own (stripe and bytedance are typical representatives), or they can easily attract private capital with strong appeal (such as databricks), or both (spacex). these strategies effectively alleviate the urgent expectations of employees and investors for sharing results, making these companies (including canva in the design software field) known as the "shy five", meaning that they maintain a cautious attitude on the road to listing.

with the news of openai's latest round of private financing, the question of whether it really needs or intends to go public in the near future (such as 2026) has once again sparked widespread discussion, and the heat of related topics may continue to heat up. in this process, we should consider the following factors comprehensively, rather than relying on a single news event:

1. urgency of capital needs

openai's current and future development relies on huge financial support. given that its cloud server costs, large model training costs, and employee salaries are high, and it is difficult to obtain significant cash flow in the short term, the capital pressure is obvious.

compared with companies that have achieved profitability or have stable cash flow (such as stripe, bytedance, and spacex), openai's gross profit margin may be at a lower level, which further highlights its high reliance on external financing. although the successful financing cases of companies such as databricks are of reference value, openai's financial situation is different from them and needs to be evaluated separately.

2. limitations of private capital markets

while openai has done a good job of attracting private capital, that source is not limitless, especially when considering that thrive capital led this round after having just led an employee buyback at a valuation of $86 billion, which may suggest that the market is cautious about this valuation (although there are exceptions).

in addition, if openai chooses to raise funds from non-traditional channels such as middle eastern sovereign wealth funds, it may attract special attention from key stakeholders such as the us government and increase the complexity of its operations.

3. the transformation challenge of non-profit structure

openai currently operates as a nonprofit with a for-profit arm, a unique structure that will need to undergo significant changes before an ipo. altman has expressed a vision to transform the company into a public benefit company, a model similar to that of listed companies such as warby parker and allbirds, which aims to balance commercial success with social welfare.

4. joining of financial leaders

in june of this year, openai recruited sarah friar, a heavyweight financial expert, as its chief financial officer. friar was the chief financial officer of square and led it to its ipo. later, as the ceo of nextdoor, he also took it public through spac.

freire has extensive ipo experience, and her joining will undoubtedly inject a shot in the arm for openai's preparations for listing. faced with heavy tasks such as auditing, financial forecasting, and governance structure changes, freire is undoubtedly the ideal person to push openai towards its listing goal.

in summary, although it is difficult to accurately predict the global economic environment and interest rate changes in the next two years, considering openai's urgent need for funds and listing as an effective way to obtain funds, many experts tend to believe that openai's chances of going public in the next few years are much higher than expected.

when will openai go public?

although openai may and needs to go public, it has no plans for an ipo in the near future. in june 2023, altman made it clear that the company has no plans for an ipo in the short term. at least, this situation may not change while he manages the company. this position has not wavered even after he was briefly fired and returned to the company.

there are two core factors that make openai cautious about going public: first, openai does not seem to need additional capital at present, thanks to the additional $10 billion investment promised by microsoft at the beginning of the year; second, it still adheres to its long-term development strategy, especially its persistent pursuit of the research and development of general artificial intelligence (agi) and super artificial intelligence (that is, artificial intelligence with self-awareness and intelligence far exceeding human level).

"as we develop super ai, we may make many decisions that most investors will find puzzling but critical," altman said.