OpenAI‘s latest funding round is unprecedented. The following charts put the deal in perspective.
The startup announced the $110 billion financing last week, pushing its valuation to $840 billion, including the new cash. It brings Amazon and Nvidia on as major backers and puts questions about OpenAI’s financial stability to bed. For now.
I asked venture capital data provider Pitchbook for help in sizing the round. It’s the largest ever, but also the biggest by a huge margin.
The deal “sets a new high for private tech fundraising,” said PitchBook analyst Dimitri Zabelin, in the understatement of the year so far.
What really stunned me: This private-market funding round is about four times larger than the biggest IPO ever.
Here’s the all-time ranking for IPOs, according to data from Renaissance Capital, a research firm focused on this key part of the market.
This is not how the financial world is supposed to work.
Usually, public markets offer companies a bigger pool of money to tap. Here, stocks trade all the time, so investors feel more confident about finding buyers quickly if they have to sell — what’s known as liquidity. And public-market investors get more information via regular financial statements, so they feel more confident putting money to work.
In private markets, investors can put money into a startup and not be able to sell their stake for years. And there’s no public financial statements for everyone to see. Historically, this has meant that there’s less money available for companies in this market. But OpenAI’s latest private round blows all this history out the water.
Speaking of history, do you remember the Facebook IPO? At the time, I thought it was huge. But that market debut raised $16 billion, about 15% of what OpenAI just took in from the private market.
OpenAI is expected to try its own IPO sometime in the next year or two. This jumbo private round has just raised the bar on that public market debut.
With such a massive valuation already, IPO investors “will want to see improving margins, stable usage trends and evidence that OpenAI can defend its position,” Zabelin said. “This round secures capital and computing power. The next test is proving that the economics of large-scale AI can support that valuation.”
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