Thrive Capital secures sweetheart deal in ChatGPT-maker OpenAI's $6.5 billion funding round

Thrive Capital has secured a favourable investment opportunity in OpenAI's current $6.5 billion funding round, according to sources familiar with the matter. The venture capital firm, led by Joshua Kushner, is not only contributing over $1 billion to the round but has also secured an option to invest an additional $1 billion next year at the same valuation if OpenAI achieves a specific revenue target.

OpenAI is projecting a significant surge in revenue, aiming to reach $11.6 billion next year, up from an estimated $3.7 billion in 2024. However, losses are expected to reach as high as $5 billion this year, primarily driven by expenses related to computing power.

The current funding round, structured as convertible debt, is expected to close by the end of next week and could value OpenAI at $150 billion, making it one of the world's most valuable private companies.

This valuation hinges on a complex restructuring plan, first reported by Reuters, which would remove control from OpenAI's non-profit board and eliminate investment return caps. The timeline for completing this conversion remains uncertain.

Thrive Capital's Strategic Advantage

Thrive Capital is contributing $1.2 billion to the round, combining its own funds with a special purpose vehicle for smaller investors. Other participants, including Microsoft, Apple, Nvidia, and Khosla Ventures, were not offered the option for future investment at the current price.

If OpenAI's valuation continues to rise, Thrive Capital's option could allow them to significantly increase their stake at a discounted price next year. The specific revenue target tied to this option remains undisclosed.

ChatGPT Driving Revenue Growth

OpenAI's revenue expectations far surpass CEO Sam Altman's earlier projection of $1 billion for this year. The company's primary revenue streams are sales of its AI services to businesses and subscriptions to its ChatGPT chatbot.

ChatGPT, OpenAI's flagship product, is expected to generate $2.7 billion in revenue this year, up from $700 million in 2023. The chatbot, which costs $20 per month, currently has around 10 million paying subscribers.