OpenAI is in early talks about raising its valuation to $500B

OpenAI is in early discussions about a secondary sale of shares to former and current employees at a valuation of $500B. The company was previously valued at $300B after securing $8.3B for a second tranche of the $40B fundraising round led by SoftBank Group Corp. The stock sale was oversubscribed by nearly five times.

Anonymous sources familiar with the matter said the company was targeting billions of dollars from the stock sales. The secondary sale is expected to raise more than last year’s $1.5 billion. OpenAI’s recurring annual revenue has grown to $12 billion since it launched ChatGPT in 2022, and it forecasts an ARR of over $20 billion in 2025. ChatGPT is dropping GPT-5 in August.

Existing investors like Thrive Capital reportedly approached the company seeking to buy some of the shares set aside for employees. Preliminary talks with Brookfield Asset Management, JPMorgan, and Apollo Global Management have already taken place. However, none of the discussions have progressed into solid commitments. OpenAI CEO Sam Altman recently confirmed that SoftBank has committed $30 billion and has already invested $7.5 billion. The rest is due by the year’s end.

OpenAI mixes private equity strategies

Sources familiar with OpenAI’s private capital funding, who requested anonymity, said the ChatGPT maker was mixing up its fundraising strategy, targeting new and old investors. Dragoneer Investment Group, a San Francisco tech-focused fund, pledged $2 billion in what is allegedly to be the largest cheque written for a startup by one company. Other investors include TPG, T Rowe Price, and Blackstone through the private equity strategies fund it runs for wealthy individuals.

Other Venture Capital participating in the last round include Coatue Management, Thrive Capital, Founders Fund, D1 Capital Partners, Andreessen Horowitz, Sequoia Capital, Tiger Global, Fidelity Management, and Altimeter Capital. However, none of these companies has made any official statements or comments regarding the funding round.

One AI analyst clarified that the secondary sale meant money was going to staff, not the company’s treasury. The deal would allow employees to cash out as OpenAI geared up for the GPT-5 release. The analyst believes “turning options into liquid cash” for the employees will keep the company’s ChatGPT core architects focused. OpenAI announced earlier this week that ChatGPT was almost hitting 700 million active users every week.

Funding edges OpenAI closer to an IPO

The money coming in is reportedly bringing OpenAI closer to an IPO. Large financial support is a prerequisite for the company to go public. The company said the funds will be used to expand infrastructure through a partnership with Oracle. SoftBank’s 2.77% stake also reinforces the company’s valuation and position ahead of the IPO.

OpenAI’s last funding round was reportedly completed way ahead of schedule. One analyst suggested this was a “stepping stone” towards an IPO. The company’s CEO said the funding round signified confidence in AI’s future. He also mentioned that his company’s ability to achieve such a high valuation would set new enterprise value benchmarks in the tech space.

Sarah Friar, OpenAI’s CFO, also said the company’s over $13 billion restructuring investment from Microsoft brought it closer to a potential IPO. However, she pointed out that the company would go public “if and when” it wanted to. Friar confirmed that the IPO was not yet cast in stone. The OpenAI CFO added that her company and the market would have to be ready for it to launch on the stock market.    

“You can show up at the altar all ready to go, and if the market’s not ready for you, yeah, you’re just out of luck.”

–Sarah Friar, CFO at OpenAI

Friar believes that any company planning to go public should build a sustainable business structure backed by enough funds. She said public companies needed “some sense of predictability,” ambition, and appetite. Friar added that the market could only put up with “a certain level of unpredictability.” Forge data showed that OpenAI had raised over $61.9 billion in 11 funding rounds.