OpenAI Wants to be Valued at $29 Billion

OpenAI now thinks it's worth $30 Billion

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WSJ Report: ChatGPT Creator Is in Talks for Tender Offer That Would Value It at $29 Billion

Hey Everyone,

2023 may be the greatest year in A.I. and time to start a Newsletter.

If you want to write a Newsletter about A.I., datascience, technology or ChatGPT and Generative A.I., I think you should just do it! In 2023, Substack is the best discovery, growth and retention platform to gain new audiences and build valuable niche communities.

I’ll be thrilled if you started yet another A.I. Newsletter, honestly the more points of view the better.?We’re all learning together.

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Let's get into this revelation first reported by the WSJ.

It's just January 7th, but ChatGPT is getting banned a lot in 2023 already. What does it mean for Microsoft Bing and GPT-4? Deliverance or mistrust in the hype? I'm reading some interesting points of view on Reddit .

In 2022, I've seen a lot of fairly good companies lose over 50% of their value, many up to 70%. For startups, this means also a reversion to the mean of vastly lower valuations. So what makes OpenAI do the reverse in such a crazy period economically and at the bring of a serious global recession with stubborn core inflation?

So OpenAI had a good demo with ChatGPT, they got tons of data for free to optimize their RLHF for GPT-4 (coming out in May, 2023).

The WSJ has reported internally they are valuing themselves at $29 Billion, even in a global economic climate that is showing significant Earnings and margins compression.

This is like Sam Altman putting on his SBF face. I have to wonder how many times we'll reincarnate the A.I. hype for commercial aims? Google thinks it knows how to reach AGI and OpenAI thinks its the one true A.I. lab.

I understand how A.I. hype works, but this isn’t ethical. The 7 year old startup is in talks to sell existing shares in a tender offer that would value the company at around $29 billion, according to people familiar with the matter, making it one of the most valuable U.S. startups on paper despite generating little revenue.

This is also to strong-arm a bigger amount from Microsoft for less share. But there’s no real indication ChatGPT will enable Microsoft Bing to take on Google anytime soon, in spite of plans to roll it out around March, 2023.

Basically OpenAI has burned through cash very quickly I speculate, and the startup is in panic mode but pretending it’s all good due to the PR manufactured hype created by the ChatGPT demo event in December, 2022.

If you have followed the ChatGPT coverage closely, Twitter and LinkedIn appear to have been complicit into helping to generate the hype. Elon Musk was a cofounder of OpenAI and Microsoft is a sponsor, major conflicts of interest.

Venture-capital firms Thrive Capital and Founders Fund are in talks to invest in the deal, which would total at least $300 million in share sales, the people said. The deal is structured as a tender offer, with the investors buying shares from existing shareholders such as employees, the people said.

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It’s a pit of shady Venture Capital startup politics at work, where the transaction is structured as a tender offer, where investor buy shares from existing holders.

Now I thought the valuation of Open at $20 Billion was ridiculous, but nearly $30 Billion? It’s beyond comprehension. It’s pure greed, considering how far from democratizing A.I. OpenAI has become as a closed company, totally against the spirit in which it was originally founded.

The new deal would roughly double OpenAI’s valuation from a prior tender offer completed in 2021, when OpenAI was valued at about $14 billion, The Wall Street Journal reported.

But how profitable is the fledgling startup? As influential as GPT has been for A.I. as a whole, it’s not exactly with a considerable moat and what revenue? OpenAI has generated?just tens of millions of dollars?in revenue, in part from selling?its AI software ?to developers, but some investors have expressed skepticism that the company can generate meaningful revenue from the technology. Skepticism? It’s A.I. hype robbery.

It’s A.I. kool-aid of the worst kind, the unprofitable kind. The $29 billion valuation for OpenAI would be about double the $14 billion valuation the company was valued at in 2021, when it last completed a tender offer, according to the WSJ.

This is all somewhat internal or a planned leak to try to boost its value artificially. In the real world, this shows very poor leadership and integrity. No final deal has been reached and terms could change, the people said. OpenAI didn’t immediately respond to a request for comment.

Listen OpenAI has been a trail-blazer but things are moving fast and it’s just one startup. OpenAI released a series of artificial intelligence-based products last year that captured the public’s attention, including the image-generation program Dall-E 2 and chatbot ChatGPT. Now there is Stability.AI and so many other A.I. labs and Google competing directly with them with LaMDA likely as mature as ChatGPT in the first place.

Where is their moat? What is their unique value proposition besides starting a trend of A.I labs selling out to BigTech for access to their supercomputers? It’s actually a disgrace that could dangerously lead to a more centralized A.I. innovation hub ruled by the Cloud such as Azure, AWS and Google Cloud.

Listen I enjoy the reporting by the WSJ, but it’s horrible news. Microsoft Corp. has also been in advanced talks?to increase its investment in OpenAI , the Journal reported. In 2019,?Microsoft invested ?$1 billion in OpenAI and became its preferred partner for commercializing new technologies for services like search engine Bing and design app Microsoft Design.

It’s positively dystopian how A.I. hype can be manipulated via Twitter and other channels just for a startup to pretend it’s worth more than it is. PaLM with RLHF is open-source, OpenAI’s servitude of the goals of Microsoft is actually a red alert for anti-trust violations in the A.I. and Cloud space. Generative A.I. was supposed to be about a democratization of A.I.

What do you think?

On LinkedIn people are trying to rationalize how OpenAI might indeed be worth that much? So who are these people saying ChatGPT have changed their lives and professionals swearing we are near AGI? Of course OpenAI claims zero marketing, as is the custom with such PR. As if one million demo users was somehow a great achievement.

It's 2023, where YC is asking startups to be lean, yet Sam Altman is not being lean with his internal valuation. This strikes me as a play somewhere between Elon Musk and SBF. I think 2022 wasn't the year of Generative A.I., it was rather the year we lost trust and faith in our Silicon Valley idols.

That the ChatGPT hype so clearly was boosted by Twitter (Elon Musk was a co-founder in OpenAI) and LinkedIn (owned by Microsoft who is a sponsor of OpenAI) si not lost on me. Now you could do the math on OpenAI's current revenue and even if GPT-4 is a wild success, they would not be worth much more than $2 Billion, if that. But they are asking for to be valued at nearly $30 Billion.

DeepMind was acquired by Google in 2014 for $500 million. So OpenAI (not as good an A.I. lab as DeepMind) is asking for 60X what Google paid for DeepMind just ten years later, all the presumption that Generative A.I. and GPT-4 will lead to useful things, more than just fun tools?

Silicon Valley is in shambles with Meta, Amazon and others shadows of their former selves valuation wise. And now I'm being asked to pray at the altar of A.I. and Sam Altman? It's need to be hallucinating after excessive use of ChatGPT to believe it. It's worse false advertising then say, Tesla FSD. The hype clouds what they don't want you to see.

No marketing eh? I hope Microsoft has some deep pockets.

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You do realize if you think ChatGPT is going to disrupt Google you are basically spreading speculative misinformation right? No let's not debate anything serious but entertain the prospect of a Microsoft sponsor startup being incredibly innovative, oh yes that's what the algorithms seem to want. Interesting. Nothing is free, not even Sam Altman warping his A.I. lab for (personal) commercial gain, a swift rise and a certain fall.

I'm officially bearish on the A.I. cult Venture Capital tried to create in 2022.