institute for continuous
health transformation
Joaquim Cardoso MSc
January 10, 2023
Key Points:
- Microsoft is set to invest $10 billion in OpenAI as part of a funding round that would value the company at $29 billion, news site Semafor reported Tuesday.
- Microsoft will reportedly get a 75% share of OpenAI’s profits until it makes back the money on its investment, after which the company would assume a 49% stake in OpenAI.
- A bet on ChatGPT could help Microsoft boost its efforts in web search, a market dominated by Google.
Semafor
Liz Hoffman and Reed Albergotti
Jan 10, 2023
Microsoft has been in talks to invest $10 billion into the owner of ChatGPT, the wildly popular app that has thrilled casual users and artificial-intelligence experts since its latest software was released last month, people familiar with the matter said.
The funding, which would also include other venture firms, would value OpenAI, the firm behind ChatGPT, at $29 billion, including the new investment, the people said.
It’s unclear if the deal has been finalized but documents sent to prospective investors in recent weeks outlining its terms indicated a targeted close by the end of 2022.
Microsoft’s infusion would be part of a complicated deal in which the company would get 75% of OpenAI’s profits until it recoups its investment, the people said. (It’s not clear whether money that OpenAI spends on Microsoft’s cloud-computing arm would count toward evening its account.)
After that threshold is reached, it would revert to a structure that reflects ownership of OpenAI, with Microsoft having a 49% stake, other investors taking another 49% and OpenAI’s nonprofit parent getting 2%.
There’s also a profit cap that varies for each set of investors — unusual for venture deals, which investors hope might return 20 or 30 times their money.
The terms and the investment amount could change, and the deal could fall apart.
Microsoft and OpenAI declined to comment.
The Wall Street Journal reported last week that ChatGPT was allowing employees and early investors to sell their shares at a valuation of $29 billion.
The Information reported in October that Microsoft, which had invested $1 billion in cash and cloud credits into OpenAI in 2019, was in talks to increase its stake.
Originally published at https://www.semafor.com on January 10, 2023.
