OpenAI's fundraising poised to boost startup's valuation to $150 billion

OpenAI is in talks to raise $6.5 billion from investors at a valuation of $150 billion, according to a report by Bloomberg.

The new valuation, a figure that excludes the money being raised, is substantially higher than the $86 billion valuation from the company's tender offer earlier this year and cements its place as one of the most valuable startups in the world.

The company is also in talks to secure $5 billion of debt from banks as part of a revolving credit facility, said one of the people, all of whom asked not to be identified because the information is private.

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The startup wouldn't comment. People close to the deal said the discussions are ongoing, and terms may still change.

The funding round is set to be led by Thrive Capital, Bloomberg earlier reported. Thrive declined to comment on the new valuation. Microsoft Corp., the company's biggest investor, is also poised to take part, while Apple Inc. and Nvidia Corp. have been discussing investments.

OpenAI isn't the first big tech startup to head to Wall Street banks for a revolving credit facility. A spate of technology companies, including Facebook Meta Platforms Inc., Alibaba Group Holding Ltd., Uber Technologies Inc. and DoorDash Inc., drawn on Wall Street for credit lines before a public offering, often in part to solidify relationships with banks. Historically, companies tend to reward banks that make big credit commitments with roles on their IPOs. In return, lenders sometimes offer better terms for financing.

Founded in 2015, OpenAI has been at the white-hot centre of the technology industry's rapid pivot to AI, with the release in 2022 of its user-friendly chatbot, ChatGPT, kicking off an investing frenzy. Its products, which generate realistic images and human-sounding text using only a few words of prompting, have captured the attention of both consumers and investors.

It is a far cry from the organisation it was upon inception. It briefly booted its Chief Executive Officer, Sam Altman, last year. Only a few of that founding team remain today, and the company has moved to revamp its board of directors, adding to the executive suite.

The financing will back the computing power needed as well as other operational expenses, said OpenAI Chief Financial Officer Sarah Friar in a note to employees last month, Bloomberg reported. In that note, she added that the startup is planning a tender offer for staff to sell some shares at the end of this year.