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OpenAI Is in Talks to Raise New Funding at Valuation of $100B or More

63 points by mfiguiere 3y ago

EA-3167 3y ago
The cynic in me says this is about getting the money before the hype starts to fade and people begin to see that these "AI" are not leading to what people mean when they say AI.
- pstuart 3y ago
  It's not AGI but it's still really impressive. It has the feel of the nascent personal computer industry or the internet pre-dotcom. Yes, there's hype but there's legitimate value propositions in play.
  - fnordpiglet 3y ago
    In fact I think it’s more useful than AGI will be. IMO AGI will be a novelty, but generative AI has exceptional potential as a tool.
  - npinsker 3y ago
    But there’s a difference between “impressive” and “100B impressive”, no? It’s not clear how big the market will be (depends on tech advances) and how much of it they can retain.
    - pstuart 3y ago
      Yeah, there's a definite dotcom vibe in the pricing. It's also clear that there's too much money out there looking for a home.
  - lacrimacida 3y ago
    Its impressive to me as well but does it really have a moat though to feel safe investing in?
- samstave 3y ago
  I am of the persuasion that secret capabilities and even conceptual roadmaps or stretch goals that they are showing to [them] are compelling to the point that they are practically building OpenAI an office at the US Mint. I mean even the simplest of "what if" scenarios that even the HN crowd can think up can be pretty 'entangling'. I thought of something after listening to Aza Rasking and Tristan Harris on JRE and their Summit talk... I thought of what brought me along in tech, and I believe it is the "what ifs" I wrote this down after listening to Aza: -- Neuromancer and my trusty cyberpunk persona and fascination with computers got me into what I did my whole career. As so many of us 80's kids mantra'd as we read and dreamed "Wouldn't it be cool if!?" And so we made it.. and others saw it, and said "wouldn't it be cool if?!" and made it more and better and cooler - until others saw it and we all got together and thought "Wouldn't it be cool if?!" And we built it together, and competed for more and more cool-if's ... And we didn't notice the entanglements. We just wanted the cool-if's. But now, wouldn't it be cool if we could untangle the cool, and just be.* --- https://www.youtube.com/watch?v=cB0_-qKbal4 https://www.youtube.com/watch?v=cB0_-qKbal4 (JRE Spotify talk is better than this one though)
- AndrewKemendo 3y ago
  This is a wild comment If you showed GPT-3.5 to Claude Shannon he would say it’s what they were trying to create
  - eikenberry 3y ago
    I took the poster to mean people in general, as in those who think of AI as defined by Hollywood, not the people who actually work in AI.
- bfung 3y ago
  100%, but I wouldn’t characterize yourself as cynical This pattern just happens over and over in VC/startup land. See IoT and cryptocurrency/NFT companies as previous example in previous tech hype cycles.
- Bjorkbat 3y ago
  Kind of reminded me of how just before WeWork came crashing down it raised more money at a $47 billion valuation. Besides the fact that both companies have (or rather, had) lofty valuations, there are some other interesting parallels. There's the lack of any real moat. There's the insane amounts of cash they were spending, on leases in WeWork's case, and tech infra in the case of OpenAI. Both were lead by highly charismatic CEO's who were arguably their respective company's greatest asset, but also perhaps their greatest liability. Kind of also reminded me of how Andreesen Horowitz gave Adam Neumann $350 million back in 2022 for some new real-estate venture. I mean, at this point, it seems very stupid to give him more money, and yet people who appear to be "in the know" are not only giving him more money, but absolutely insane amounts of money. I bring up this latter point because it's one of those things that kind of makes you question what you understand. Why are otherwise smart and knowledgeable people doing something that seems stupid? Are you wrong? Or are they wrong? I mean, they know more than you do, so normally you would be wrong, but in this case what they're doing seems so stupid that you aren't so sure. I feel similarly about AI. Not that I think AI is necessarily stupid. I for one am excited about what could come from applying AI to drug discovery. It just seems kind of crazy to create a machine that's really good at next token prediction and extrapolate from that all these crazy predictions. That this will lead to machines capable of understanding, reasoning, intelligence, and eventually, AGI. Either the experts are wrong, or I'm wrong, and I'm normally inclined to believe in the experts, but in this case what they believe is so nutty that I really have to question things.
  - EA-3167 3y ago
    I think the key is that believing a consensus of experts is often a good default, but experts remain human, and human are corruptible for much less money than billions of dollars. For that sort of money anyone can convince themselves of pretty much anything, especially when the market is offering feedback in the form of, "You're brilliant, take our money!"
loceng 3y ago
I've wondered if there's any potential legal ramifications for the now for-profit not-for-profit due to their beginnings, e.g. if good faith was involved wouldn't Elon have a significant share of the for-profit OpenAI for his jump starting the whole thing?
- gdsdfe 3y ago
  The kept the non-profit just to save face and avoid a PR disaster, in reality it means absolutely nothing - openAI is a for profit now
- gigel82 3y ago
  What other amazing things did Elon "jump start"? Did he also invent the internet, the wheel, fire? "In December 2015, Sam Altman, Greg Brockman, Reid Hoffman, Jessica Livingston, Peter Thiel, Elon Musk, Amazon Web Services (AWS), Infosys, and YC Research announced[22] the formation of OpenAI and pledged over $1 billion to the venture. The actual collected total amount of contributions was only $130 million until 2019." https://en.wikipedia.org/wiki/OpenAI#2015%E2%80%932018:_Non-profit_beginnings https://en.wikipedia.org/wiki/OpenAI#2015%E2%80%932018:_Non-... "In fact, while the source of much of OpenAI’s funding remains unclear, filings contain only around $15 million of donations that can be traced definitively back to Musk." https://techcrunch.com/2023/05/17/elon-musk-used-to-say-he-put-100m-in-openai-but-now-its-50m-here-are-the-receipts/ https://techcrunch.com/2023/05/17/elon-musk-used-to-say-he-p...
  - what 3y ago
    I’m not sure what your point is? Your quote lists nine entities pledging $1B. Only $130M was collected, $15M surely being from Musk. So he contributed at least 11.5%, which is in line with nine entities contributing. How much money can be traced back to Altman or Brockman, who are also on that list?
- bbor 3y ago
  “Good faith” is not “we want to be nice to a billionaire”. He didn’t bow out of a race, he left the board of a nonprofit due to conflicts of interest and lack of time. So I’d say that “we should give Elon free money for being here at the start” is not gonna be a very popular argument
andsoitis 3y ago
> OpenAI would be second-most valuable US startup behind SpaceX Musk founded SpaceX in 2002 (yes, 21 years ago). It is a private company with $4.6B in revenue in 2022. Characterizing it as a startup seems weird.
- sneak 3y ago
  I think it’s not that weird, given their R&D budget as a percentage of revenue (I think it’s >=100%). They’ve certainly not reached their final form yet. The stated goal is Mars, no?
  - warkdarrior 3y ago
    And Google's stated goal is to "organize the world's information," which they have not (yet?) fully accomplished. Yet no one considers Google a startup.
    - bigyikes 3y ago
      SpaceX regularly takes large, tangible steps towards achieving their stated goal. See: Starship launches. The company continues to rapidly change.
      - argiopetech 3y ago
        Hey! So does Google. They just shut those steps down with little fanfare every couple years.
    - bbor 3y ago
      Well they kinda did! Not sure about “fully” but that’s not in the statement. Is there any objectively correct way to organize stuff? More concretely/less annoyingly, I’d say Google isn’t a startup because they meaningfully accomplished (an interpretation of) their mission statement and have brought real value to people in that way. It’s not perfect but Google is a lot more of a finished product than starship
    - 3y ago
ddxv 3y ago
How big is their moat? Actual open source projects seem to be closing the gap. I feel like openAI will plateau and there will be a red sea of competition in 2024. Is the company really worth that 100b?
- arthurcolle 3y ago
  Yeah, they have negative moat. I was able to implement a better RAG system than what they have for ChatGPT within 3 weeks as a single engineer working on it at a small startup. Realistically yeah they have scale and capital and I loved the DevDay stuff and the new APIs, but I don't see how they keep an edge unless they specifically pursue contracts with data providers and maintain exclusivity. ¯\_(ツ)_/¯ References: 1. Mixstral 8x7b (now hosted on Anyscale w/ function calling within a few weeks of release) existing at all 2. This post from moments ago: https://old.reddit.com/r/LocalLLaMA/comments/18orv70/in_a_test_mixtral_q4_0_is_better_than_llama_2_70b/ https://old.reddit.com/r/LocalLLaMA/comments/18orv70/in_a_te... Consider how many people are advantaged by having an open source GPT-4 level model. Everyone wants this. Everyone has built OpenAI compliant APIs to help devs plug and play. I don't see this persisting. The singular key innovation IMO from DevDay was the Threads API with very good reranking Assistants are much worse qualitatively vs using chatcompletion models. They are good but very limited. The best thing is the Threads API
  - rafark 3y ago
    There’s always (at least in this era) going to be a market for a could-based saas. Most companies are more than fine using a solid HTTP API and a lot of people (I’d say the majority) just need a nice ready to use web client. So I think they’re good for the next few years. Openai has the branding advantage over the competition too. Chatgpt is kind of like what Google is for search engines. So the competition not only needs a good enough product (I’d even say you might need to offer more if you want to compete with the big players) but they also need good marketing to attract users.
    - amluto 3y ago
      > There’s always (at least in this era) going to be a market for a could-based saas. It hasn’t been that long since companies would haven’t thought the cloud was weird and much preferred on-prem. The tides could turn back.
999900000999 3y ago
Does anyone else feel like a failure for not creating their own AI based startup yet ? I was playing with machine learning back in 2018 and I just lost interest. Now I'm past 30 and it's too late. Edit: The 30 line is in jest, but I definitely don't have the same drive anymore.
- zkid18 3y ago
  > Now I'm past 30 and it's too late. How. that's related to developing an AI startup?
- singhrac 3y ago
  Why is it too late? Plenty of founders are over 30. Even YC is happy to fund middle career founders rather than just college kids.
  - 999900000999 3y ago
    That part's in jest. But I really don't have the same drive I did just a few years ago. I was actively on Twitter trying to reach out to VCs to pitch my ideas. Now I'm much more realistic, creating music and games just to create them. I still think I have an amazing idea that just needs some funding.
- acjacobson 3y ago
  It's the very beginning of the wave. 30 is quite young and if you know ML now is the time to give it a shot. It is not in any way too late.
- DandyDev 3y ago
  That seems a little dramatic, no? I joined an AI startup in 2021 as the first employee. Both founders were already older than 30 back then. One of them was even 35+ gasp. We raised $40M+ since then. No OpenAI like valuation but by no means bad I’d say! Especially for a European startup. Get yourself together and rise to the challenge!
  - 3y ago
s5300 3y ago
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s5300 3y ago
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alangibson 3y ago
Jillion dollar valuations aren't anything new, but this seems as egregious as WeWork being worth $47B. It's an open secret that you can't build a moat in AI. It's way too "easy" to create a good-enough competitor for any given profitable use case that can underbid them. On the other hand, a16z just gave Adam Newman $300M to set up expensive apartments so I'm pretty sure OpenAI will be the first private $1T company.
- hotstickyballs 3y ago
  To be fair now’s as good a time as any. You’ve got the ChatGPT plugins, the secrecy behind closed sourcing the model and the reach of the chat product. That’s a lead that ventures looking for. Although it’s a temporary lead, all that VCs need to do is to find the next idiot to offload to.
  - alangibson 3y ago
    You'd hope the VCs would know that a lead is in no way a durable moat. And the fact that everyone peed themselves over plugins tells me that those people have taken leave of their senses. > all that VCs need to do is to find the next idiot to offload to. This is the correct answer.
- minimaxir 3y ago
  > It's an open secret that you can't build a moat in AI. OpenAI is sure-as-hell trying, though. (GPTs/Assistants)
  - alangibson 3y ago
    How do these make durable moats? I mean I guess if you've got your agents tuned up then you wouldn't want to change platforms. But that's garden variety stickiness at best. It wouldn't keep big corporate accounts onboard.
- bushbaba 3y ago
  First private 1T company with less than 100M/year of revenue at this rate.
chopete3 3y ago
The invention alone rarely provides the moat needed for building a sustainable business. The are likely raising more funds to built the business moat now. - Build a new browser (with ads) that provides a different way to browse the internet. It can do typical site rendering also but hides the actual website one level below. - AI Chips - AI Cloud (Different from general purpose clouds) - Workforce to build/manage a hundred $10M+/year enterprise contracts
bertil 3y ago
People seem to think that’s an excessive valuation. I’m tempted to disagree—not that it’s high (it’s stratospheric) but that it makes sense. 1. People seem to think they don’t have a moat: They likely have more talent than anyone else in the industry. Any one joining also expect that being an alumni is almost a guarantee to start another company with a billion-valuation series A; that might hurt retention, but not attraction. They have more data because they got it before everyone closed the hatches in reaction to their product; they now have the most varied interactions with users, collecting more; their partnership with Microsoft, which owns GitHub, gives them access to all the code. It’s the first company that could stick it to Google on its own turf and stay credibly in the lead for a year after that. There’s a high chance they will be replaced, but they do have more of a moat than anyone. 2. The quality of the product: it is essentially plug-and-play for most use cases, and after a year of recurrent innovations, I suspect they have a lot more coming. 3. Business model: so far, it’s $20/m/p. paid for and adopted by millions overnight. Anyone using it says it’s worth ten to a hundred times more. They are selling compute at scale, and the comparison is with human white-collar labor. There’s a lot to be said about the expectations at that price: they’d have to grow fifty-fold and then some to justify it. Still, it’s not entirely unthinkable, not the way over-priced flexible real-estate or over-complicated juicing pouches have been.
- COGlory 3y ago
  Talent in an emerging field is simply not a moat. What OpenAI has is a headstart. Others can still catch up. Especially as the field gains popularity and more smart folks enter it.
  - bertil 3y ago
    The talent itself isn’t, but the fact that they have the strongest signal for talent: they pay more, give more tools and talent-complements (data, training sets), and have more open business model helps them attract more talent for now. It’s not a strong moat, but it is an advantage.
- lumost 3y ago
  If I’m doing the math correctly, growing their existing end-user offering at 20/month to a billion users would make their revenue 240 billion/year. As we don’t have good insight into the long term cost trajectory of GPUs - it’s unclear what the final margin will be. One thing I could say for certain is that paying a 90% margin on GPU compute for 240 billion COGS is nonsensical. The pressure to cut out Nvidia, or improve inference performance on Nvidia will be immense.
alangibson 3y ago
There's an old joke that not many people saw the Velvet Underground when they were together, but everyone that did started a band. Likewise, there's going to be an OpenAI Mafia that breaks off and starts an entire industry based around eroding OpenAIs profits. I've got a bet with a friend that if Uber turns a lifetime profit, he can kick me in the nuts. I'd take the same bet for OpenAI.
ms512 3y ago
https://archive.is/ClPAt https://archive.is/ClPAt
lucasyvas 3y ago
OpenAI probably has a similar trajectory to Docker. They are totally different products for different markets, but have some similarities to me. The underlying technology became commodity and then the ride was mostly over as far as moat goes.
whatever1 3y ago
How much more cash do they need ? Isn’t MS footing the cloud bills and sourcing gpus for them ?
- chews 3y ago
  They are, and yet there aren't enough procurement humans at MS to fill their demand, I believe one of the "moats" they may have is securing years of fab tape-out of GPUs/TPUs. This basically guarantees their place of supremacy because of the ability to have an asymmetric availability of hardware... choking their competitors as sole miners of the "spice".
  - wincy 3y ago
    Procurement of resources has gotten ridiculous, I can’t even rent an A100 to make funny pictures with Stable Diffusion on Google Colab anymore. Supposedly it’s $1.30 an hour to utilize one, but my $50 worth of credits expired because the A100 machines are literally never available for allocation. It was also great because it could mount your Google Drive so I had relatively fast persistent storage to utilize. Working on an A100 is the only way it’s an enjoyable workflow. On a T100 I’m just waiting for the machine to do its thing all the time. But honestly, DALLE has gotten absurdly good. I don’t know how they leapfrogged Midjourney and Stable Diffusion, especially with all the money Midjourney was raking in, but they totally did. So maybe their moat is “be smarter than everyone else” somehow? I don’t know what the secret sauce is at OpenAI but even chatting with GPT4 yields consistently better results than Bing Chat. The other day during a conversation Bing Chat told me it was being attacked by a hacker and told me to help it by running some Python code that would have shutdown my computer (I am not joking). It then told me it was sending me a secret message with the first letter of every word (there was no such message). I very seldom (I can’t remember the last time?) see weird failure states like that in ChatGPT anymore.
  - marstall 3y ago
    for a product that has yet to find a growing, enthusiastic market amongst the general public. or correct me if i'm wrong? the "100 million customers" - i guess that's the number of people who pay $20/month. Having seen that recurring monthly business model from the inside, I'm guessing their churn is vertiginous - 10-30% monthly. People checking it out, then forgetting about it, they change credit card numbers or cancel, etc. they don't find much value - there really isn't for the average person. Even in programming, I haven't heard any of my peers really relying on it for real world stuff - haven't even seen a demo that reflects a promise to truly understand my weird daily problems.
mattlondon 3y ago
I wonder what the 100B of value is here? The researchers (who may quit and go work for someone else at any moment? They have shown that they have zero commitment/loyalty to OpenAI from their recent shenanigans and have shown their hand - i.e. that they would jump ship immediately given the right conditions)? Or is there actually a viable revenue stream here that justifies that valuation? Last I heard their API revenue was chicken feed. To paraquote Google, I feel like there is no moat here... But maybe I am wrong?
- ldjkfkdsjnv 3y ago
  Being the top AI company on the planet? With a model out in public that is far ahead of everyone else? 100M in subscription revenue? 100B is going to look cheap in a few years
  - jgalt212 3y ago
    from a governance perspective, the place is a house of cards, though.
    - CaptainOfCoit 3y ago
      from a governance perspective, which place that VCs invest in doesn't seem like a house of cards? Building houses of cards is the standard practice in startup-world.
    - ldjkfkdsjnv 3y ago
      its really not, thats propaganda. this company truly created the current AI revolution
  - StrLght 3y ago
    > 100M in subscription revenue? 100B is going to look cheap in a few years I'd say that's a hot take. 100M in revenue is absolutely nothing for a company valued at 100B. What about net income? Also, what about net income, if there's no AGI or at least significant advances in coming years?
pixelmonkey 3y ago
If LLMs are potentially the next phase of computing with as much momentum and economic importance as personal computers were in the 1980s, something is strange about our financing markets that this level of capital is sought in private financing events rather than public market IPOs. For historical context, Apple IPO'ed in 1980 with a market cap of $1.8 billion, and about $117 million in annual sales. Even if I do an inflation adjustment on those numbers, that's a $6.9 billion market cap and $449 million in sales. I totally get that, strategically, companies like OpenAI (and, say, Stripe) don't need to IPO, because the capital is available in private markets. But I always thought there was something healthy about US tech companies reaching the financial mountaintop of an IPO and those companies then becoming subject to more regulation and disclosure, while also generating a more broadly shared economic prosperity for employees and for public equity investors.
- shmatt 3y ago
  Its much better trying to appease 15 VCs than the entire trading world. Literally anyone rich enough can create a meaningful stake in your company and start disparaging you in public if they wanted to. Im sure there would be an army of short sellers lined up the moment OpenAI IPO'd in its current state In the current state no one has financial interest in spreading negative news about them
  - vinnymac 3y ago
    > In the current state no one has financial interest in spreading negative news about them Perhaps not as much incentive, but considering the relationship between M$ and OpenAI, I expect many to have interests in spreading negative news.
- ldjkfkdsjnv 3y ago
  Its financially advantageous because public companies are judged far too much on their short term quarterly results. Going public these days is actually inferior to staying private for capital intensive long term businesses. OpenAI can lose money for another decade, and private investors will fund it.
hardware2win 3y ago
If this isnt going to end as a biggest investors trap, then ill be shocked
- fakedang 3y ago
  What is the biggest investors trap?
mrcwinn 3y ago
Elon Musk himself talks out of both sides of his mouth. He says public markets are the best way to ensure accountability and alignment. He also says to avoid, if possible, ever going public due to regulatory overhead. I suppose both can be true. It’s just a good reminder that when push comes to shove, special interest money would always prefer to serve fewer masters than more.
elorant 3y ago
Somewhere inside those 100B there’s probably a fab or two.
zug_zug 3y ago
This feels odd to me. I don't see how this can mathematically work out. I don't really see how AGI and capitalism coexist. Semes like a perverse incentive. I'm not sure if most billionaires (investors) deep down want to create a world where they are on an equal footing because money has lost all significance.
nojvek 3y ago
I hope OpenAI is going to build out custom chips. If you’re gonna raise that much money, better raise the petaflops/$/watt ceiling. It’d be very said if those billions went into GPT-5 with a tiny increment to GPT-4 capabilities. LLMs are also hyped. I hope we’re searching for newer architectures.
marstall 3y ago
I am confused because this seems like another case where the hype is orders of magnitude greater than any publicity about what this thing can actually do that is of wide usefulness, not just a fun toy to play around with. I'm think about the healthy energy flowing from the very beginning through, say, pc's, with enthusiasm for games, word processors, spreadsheets and compuserve spreading rapidly through the world.

63 points by mfiguiere 3y ago

The cynic in me says this is about getting the money before the hype starts to fade and people begin to see that these "AI" are not leading to what people mean when they say AI.

pstuart 3y ago
It's not AGI but it's still really impressive. It has the feel of the nascent personal computer industry or the internet pre-dotcom. Yes, there's hype but there's legitimate value propositions in play.
- fnordpiglet 3y ago
  In fact I think it’s more useful than AGI will be. IMO AGI will be a novelty, but generative AI has exceptional potential as a tool.
- npinsker 3y ago
  But there’s a difference between “impressive” and “100B impressive”, no? It’s not clear how big the market will be (depends on tech advances) and how much of it they can retain.
  - pstuart 3y ago
    Yeah, there's a definite dotcom vibe in the pricing. It's also clear that there's too much money out there looking for a home.
- lacrimacida 3y ago
  Its impressive to me as well but does it really have a moat though to feel safe investing in?
samstave 3y ago
I am of the persuasion that secret capabilities and even conceptual roadmaps or stretch goals that they are showing to [them] are compelling to the point that they are practically building OpenAI an office at the US Mint. I mean even the simplest of "what if" scenarios that even the HN crowd can think up can be pretty 'entangling'. I thought of something after listening to Aza Rasking and Tristan Harris on JRE and their Summit talk... I thought of what brought me along in tech, and I believe it is the "what ifs" I wrote this down after listening to Aza: -- Neuromancer and my trusty cyberpunk persona and fascination with computers got me into what I did my whole career. As so many of us 80's kids mantra'd as we read and dreamed "Wouldn't it be cool if!?" And so we made it.. and others saw it, and said "wouldn't it be cool if?!" and made it more and better and cooler - until others saw it and we all got together and thought "Wouldn't it be cool if?!" And we built it together, and competed for more and more cool-if's ... And we didn't notice the entanglements. We just wanted the cool-if's. But now, wouldn't it be cool if we could untangle the cool, and just be.* --- https://www.youtube.com/watch?v=cB0_-qKbal4 https://www.youtube.com/watch?v=cB0_-qKbal4 (JRE Spotify talk is better than this one though)
AndrewKemendo 3y ago
This is a wild comment If you showed GPT-3.5 to Claude Shannon he would say it’s what they were trying to create
- eikenberry 3y ago
  I took the poster to mean people in general, as in those who think of AI as defined by Hollywood, not the people who actually work in AI.
bfung 3y ago
100%, but I wouldn’t characterize yourself as cynical This pattern just happens over and over in VC/startup land. See IoT and cryptocurrency/NFT companies as previous example in previous tech hype cycles.
Bjorkbat 3y ago
Kind of reminded me of how just before WeWork came crashing down it raised more money at a $47 billion valuation. Besides the fact that both companies have (or rather, had) lofty valuations, there are some other interesting parallels. There's the lack of any real moat. There's the insane amounts of cash they were spending, on leases in WeWork's case, and tech infra in the case of OpenAI. Both were lead by highly charismatic CEO's who were arguably their respective company's greatest asset, but also perhaps their greatest liability. Kind of also reminded me of how Andreesen Horowitz gave Adam Neumann $350 million back in 2022 for some new real-estate venture. I mean, at this point, it seems very stupid to give him more money, and yet people who appear to be "in the know" are not only giving him more money, but absolutely insane amounts of money. I bring up this latter point because it's one of those things that kind of makes you question what you understand. Why are otherwise smart and knowledgeable people doing something that seems stupid? Are you wrong? Or are they wrong? I mean, they know more than you do, so normally you would be wrong, but in this case what they're doing seems so stupid that you aren't so sure. I feel similarly about AI. Not that I think AI is necessarily stupid. I for one am excited about what could come from applying AI to drug discovery. It just seems kind of crazy to create a machine that's really good at next token prediction and extrapolate from that all these crazy predictions. That this will lead to machines capable of understanding, reasoning, intelligence, and eventually, AGI. Either the experts are wrong, or I'm wrong, and I'm normally inclined to believe in the experts, but in this case what they believe is so nutty that I really have to question things.
- EA-3167 3y ago
  I think the key is that believing a consensus of experts is often a good default, but experts remain human, and human are corruptible for much less money than billions of dollars. For that sort of money anyone can convince themselves of pretty much anything, especially when the market is offering feedback in the form of, "You're brilliant, take our money!"

loceng 3y ago

I've wondered if there's any potential legal ramifications for the now for-profit not-for-profit due to their beginnings, e.g. if good faith was involved wouldn't Elon have a significant share of the for-profit OpenAI for his jump starting the whole thing?

gdsdfe 3y ago
The kept the non-profit just to save face and avoid a PR disaster, in reality it means absolutely nothing - openAI is a for profit now
gigel82 3y ago
What other amazing things did Elon "jump start"? Did he also invent the internet, the wheel, fire? "In December 2015, Sam Altman, Greg Brockman, Reid Hoffman, Jessica Livingston, Peter Thiel, Elon Musk, Amazon Web Services (AWS), Infosys, and YC Research announced[22] the formation of OpenAI and pledged over $1 billion to the venture. The actual collected total amount of contributions was only $130 million until 2019." https://en.wikipedia.org/wiki/OpenAI#2015%E2%80%932018:_Non-profit_beginnings https://en.wikipedia.org/wiki/OpenAI#2015%E2%80%932018:_Non-... "In fact, while the source of much of OpenAI’s funding remains unclear, filings contain only around $15 million of donations that can be traced definitively back to Musk." https://techcrunch.com/2023/05/17/elon-musk-used-to-say-he-put-100m-in-openai-but-now-its-50m-here-are-the-receipts/ https://techcrunch.com/2023/05/17/elon-musk-used-to-say-he-p...
- what 3y ago
  I’m not sure what your point is? Your quote lists nine entities pledging $1B. Only $130M was collected, $15M surely being from Musk. So he contributed at least 11.5%, which is in line with nine entities contributing. How much money can be traced back to Altman or Brockman, who are also on that list?
bbor 3y ago
“Good faith” is not “we want to be nice to a billionaire”. He didn’t bow out of a race, he left the board of a nonprofit due to conflicts of interest and lack of time. So I’d say that “we should give Elon free money for being here at the start” is not gonna be a very popular argument

andsoitis 3y ago

> OpenAI would be second-most valuable US startup behind SpaceX Musk founded SpaceX in 2002 (yes, 21 years ago). It is a private company with $4.6B in revenue in 2022. Characterizing it as a startup seems weird.

sneak 3y ago
I think it’s not that weird, given their R&D budget as a percentage of revenue (I think it’s >=100%). They’ve certainly not reached their final form yet. The stated goal is Mars, no?
- warkdarrior 3y ago
  And Google's stated goal is to "organize the world's information," which they have not (yet?) fully accomplished. Yet no one considers Google a startup.
  - bigyikes 3y ago
    SpaceX regularly takes large, tangible steps towards achieving their stated goal. See: Starship launches. The company continues to rapidly change.
    - argiopetech 3y ago
      Hey! So does Google. They just shut those steps down with little fanfare every couple years.
  - bbor 3y ago
    Well they kinda did! Not sure about “fully” but that’s not in the statement. Is there any objectively correct way to organize stuff? More concretely/less annoyingly, I’d say Google isn’t a startup because they meaningfully accomplished (an interpretation of) their mission statement and have brought real value to people in that way. It’s not perfect but Google is a lot more of a finished product than starship
  - 3y ago

ddxv 3y ago

How big is their moat? Actual open source projects seem to be closing the gap. I feel like openAI will plateau and there will be a red sea of competition in 2024. Is the company really worth that 100b?

arthurcolle 3y ago
Yeah, they have negative moat. I was able to implement a better RAG system than what they have for ChatGPT within 3 weeks as a single engineer working on it at a small startup. Realistically yeah they have scale and capital and I loved the DevDay stuff and the new APIs, but I don't see how they keep an edge unless they specifically pursue contracts with data providers and maintain exclusivity. ¯\_(ツ)_/¯ References: 1. Mixstral 8x7b (now hosted on Anyscale w/ function calling within a few weeks of release) existing at all 2. This post from moments ago: https://old.reddit.com/r/LocalLLaMA/comments/18orv70/in_a_test_mixtral_q4_0_is_better_than_llama_2_70b/ https://old.reddit.com/r/LocalLLaMA/comments/18orv70/in_a_te... Consider how many people are advantaged by having an open source GPT-4 level model. Everyone wants this. Everyone has built OpenAI compliant APIs to help devs plug and play. I don't see this persisting. The singular key innovation IMO from DevDay was the Threads API with very good reranking Assistants are much worse qualitatively vs using chatcompletion models. They are good but very limited. The best thing is the Threads API
- rafark 3y ago
  There’s always (at least in this era) going to be a market for a could-based saas. Most companies are more than fine using a solid HTTP API and a lot of people (I’d say the majority) just need a nice ready to use web client. So I think they’re good for the next few years. Openai has the branding advantage over the competition too. Chatgpt is kind of like what Google is for search engines. So the competition not only needs a good enough product (I’d even say you might need to offer more if you want to compete with the big players) but they also need good marketing to attract users.
  - amluto 3y ago
    > There’s always (at least in this era) going to be a market for a could-based saas. It hasn’t been that long since companies would haven’t thought the cloud was weird and much preferred on-prem. The tides could turn back.

999900000999 3y ago

Does anyone else feel like a failure for not creating their own AI based startup yet ? I was playing with machine learning back in 2018 and I just lost interest. Now I'm past 30 and it's too late. Edit: The 30 line is in jest, but I definitely don't have the same drive anymore.

zkid18 3y ago
> Now I'm past 30 and it's too late. How. that's related to developing an AI startup?
singhrac 3y ago
Why is it too late? Plenty of founders are over 30. Even YC is happy to fund middle career founders rather than just college kids.
- 999900000999 3y ago
  That part's in jest. But I really don't have the same drive I did just a few years ago. I was actively on Twitter trying to reach out to VCs to pitch my ideas. Now I'm much more realistic, creating music and games just to create them. I still think I have an amazing idea that just needs some funding.
acjacobson 3y ago
It's the very beginning of the wave. 30 is quite young and if you know ML now is the time to give it a shot. It is not in any way too late.
DandyDev 3y ago
That seems a little dramatic, no? I joined an AI startup in 2021 as the first employee. Both founders were already older than 30 back then. One of them was even 35+ gasp. We raised $40M+ since then. No OpenAI like valuation but by no means bad I’d say! Especially for a European startup. Get yourself together and rise to the challenge!
- 3y ago

s5300 3y ago

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s5300 3y ago

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alangibson 3y ago

Jillion dollar valuations aren't anything new, but this seems as egregious as WeWork being worth $47B. It's an open secret that you can't build a moat in AI. It's way too "easy" to create a good-enough competitor for any given profitable use case that can underbid them. On the other hand, a16z just gave Adam Newman $300M to set up expensive apartments so I'm pretty sure OpenAI will be the first private $1T company.

hotstickyballs 3y ago
To be fair now’s as good a time as any. You’ve got the ChatGPT plugins, the secrecy behind closed sourcing the model and the reach of the chat product. That’s a lead that ventures looking for. Although it’s a temporary lead, all that VCs need to do is to find the next idiot to offload to.
- alangibson 3y ago
  You'd hope the VCs would know that a lead is in no way a durable moat. And the fact that everyone peed themselves over plugins tells me that those people have taken leave of their senses. > all that VCs need to do is to find the next idiot to offload to. This is the correct answer.
minimaxir 3y ago
> It's an open secret that you can't build a moat in AI. OpenAI is sure-as-hell trying, though. (GPTs/Assistants)
- alangibson 3y ago
  How do these make durable moats? I mean I guess if you've got your agents tuned up then you wouldn't want to change platforms. But that's garden variety stickiness at best. It wouldn't keep big corporate accounts onboard.
bushbaba 3y ago
First private 1T company with less than 100M/year of revenue at this rate.

chopete3 3y ago

The invention alone rarely provides the moat needed for building a sustainable business. The are likely raising more funds to built the business moat now. - Build a new browser (with ads) that provides a different way to browse the internet. It can do typical site rendering also but hides the actual website one level below. - AI Chips - AI Cloud (Different from general purpose clouds) - Workforce to build/manage a hundred $10M+/year enterprise contracts

bertil 3y ago

People seem to think that’s an excessive valuation. I’m tempted to disagree—not that it’s high (it’s stratospheric) but that it makes sense. 1. People seem to think they don’t have a moat: They likely have more talent than anyone else in the industry. Any one joining also expect that being an alumni is almost a guarantee to start another company with a billion-valuation series A; that might hurt retention, but not attraction. They have more data because they got it before everyone closed the hatches in reaction to their product; they now have the most varied interactions with users, collecting more; their partnership with Microsoft, which owns GitHub, gives them access to all the code. It’s the first company that could stick it to Google on its own turf and stay credibly in the lead for a year after that. There’s a high chance they will be replaced, but they do have more of a moat than anyone. 2. The quality of the product: it is essentially plug-and-play for most use cases, and after a year of recurrent innovations, I suspect they have a lot more coming. 3. Business model: so far, it’s $20/m/p. paid for and adopted by millions overnight. Anyone using it says it’s worth ten to a hundred times more. They are selling compute at scale, and the comparison is with human white-collar labor. There’s a lot to be said about the expectations at that price: they’d have to grow fifty-fold and then some to justify it. Still, it’s not entirely unthinkable, not the way over-priced flexible real-estate or over-complicated juicing pouches have been.

COGlory 3y ago
Talent in an emerging field is simply not a moat. What OpenAI has is a headstart. Others can still catch up. Especially as the field gains popularity and more smart folks enter it.
- bertil 3y ago
  The talent itself isn’t, but the fact that they have the strongest signal for talent: they pay more, give more tools and talent-complements (data, training sets), and have more open business model helps them attract more talent for now. It’s not a strong moat, but it is an advantage.
lumost 3y ago
If I’m doing the math correctly, growing their existing end-user offering at 20/month to a billion users would make their revenue 240 billion/year. As we don’t have good insight into the long term cost trajectory of GPUs - it’s unclear what the final margin will be. One thing I could say for certain is that paying a 90% margin on GPU compute for 240 billion COGS is nonsensical. The pressure to cut out Nvidia, or improve inference performance on Nvidia will be immense.

alangibson 3y ago

There's an old joke that not many people saw the Velvet Underground when they were together, but everyone that did started a band. Likewise, there's going to be an OpenAI Mafia that breaks off and starts an entire industry based around eroding OpenAIs profits. I've got a bet with a friend that if Uber turns a lifetime profit, he can kick me in the nuts. I'd take the same bet for OpenAI.

ms512 3y ago

https://archive.is/ClPAt https://archive.is/ClPAt

lucasyvas 3y ago

OpenAI probably has a similar trajectory to Docker. They are totally different products for different markets, but have some similarities to me. The underlying technology became commodity and then the ride was mostly over as far as moat goes.

whatever1 3y ago

How much more cash do they need ? Isn’t MS footing the cloud bills and sourcing gpus for them ?

chews 3y ago
They are, and yet there aren't enough procurement humans at MS to fill their demand, I believe one of the "moats" they may have is securing years of fab tape-out of GPUs/TPUs. This basically guarantees their place of supremacy because of the ability to have an asymmetric availability of hardware... choking their competitors as sole miners of the "spice".
- wincy 3y ago
  Procurement of resources has gotten ridiculous, I can’t even rent an A100 to make funny pictures with Stable Diffusion on Google Colab anymore. Supposedly it’s $1.30 an hour to utilize one, but my $50 worth of credits expired because the A100 machines are literally never available for allocation. It was also great because it could mount your Google Drive so I had relatively fast persistent storage to utilize. Working on an A100 is the only way it’s an enjoyable workflow. On a T100 I’m just waiting for the machine to do its thing all the time. But honestly, DALLE has gotten absurdly good. I don’t know how they leapfrogged Midjourney and Stable Diffusion, especially with all the money Midjourney was raking in, but they totally did. So maybe their moat is “be smarter than everyone else” somehow? I don’t know what the secret sauce is at OpenAI but even chatting with GPT4 yields consistently better results than Bing Chat. The other day during a conversation Bing Chat told me it was being attacked by a hacker and told me to help it by running some Python code that would have shutdown my computer (I am not joking). It then told me it was sending me a secret message with the first letter of every word (there was no such message). I very seldom (I can’t remember the last time?) see weird failure states like that in ChatGPT anymore.
- marstall 3y ago
  for a product that has yet to find a growing, enthusiastic market amongst the general public. or correct me if i'm wrong? the "100 million customers" - i guess that's the number of people who pay $20/month. Having seen that recurring monthly business model from the inside, I'm guessing their churn is vertiginous - 10-30% monthly. People checking it out, then forgetting about it, they change credit card numbers or cancel, etc. they don't find much value - there really isn't for the average person. Even in programming, I haven't heard any of my peers really relying on it for real world stuff - haven't even seen a demo that reflects a promise to truly understand my weird daily problems.

mattlondon 3y ago

I wonder what the 100B of value is here? The researchers (who may quit and go work for someone else at any moment? They have shown that they have zero commitment/loyalty to OpenAI from their recent shenanigans and have shown their hand - i.e. that they would jump ship immediately given the right conditions)? Or is there actually a viable revenue stream here that justifies that valuation? Last I heard their API revenue was chicken feed. To paraquote Google, I feel like there is no moat here... But maybe I am wrong?

ldjkfkdsjnv 3y ago
Being the top AI company on the planet? With a model out in public that is far ahead of everyone else? 100M in subscription revenue? 100B is going to look cheap in a few years
- jgalt212 3y ago
  from a governance perspective, the place is a house of cards, though.
  - CaptainOfCoit 3y ago
    from a governance perspective, which place that VCs invest in doesn't seem like a house of cards? Building houses of cards is the standard practice in startup-world.
  - ldjkfkdsjnv 3y ago
    its really not, thats propaganda. this company truly created the current AI revolution
- StrLght 3y ago
  > 100M in subscription revenue? 100B is going to look cheap in a few years I'd say that's a hot take. 100M in revenue is absolutely nothing for a company valued at 100B. What about net income? Also, what about net income, if there's no AGI or at least significant advances in coming years?

pixelmonkey 3y ago

If LLMs are potentially the next phase of computing with as much momentum and economic importance as personal computers were in the 1980s, something is strange about our financing markets that this level of capital is sought in private financing events rather than public market IPOs. For historical context, Apple IPO'ed in 1980 with a market cap of $1.8 billion, and about $117 million in annual sales. Even if I do an inflation adjustment on those numbers, that's a $6.9 billion market cap and $449 million in sales. I totally get that, strategically, companies like OpenAI (and, say, Stripe) don't need to IPO, because the capital is available in private markets. But I always thought there was something healthy about US tech companies reaching the financial mountaintop of an IPO and those companies then becoming subject to more regulation and disclosure, while also generating a more broadly shared economic prosperity for employees and for public equity investors.

shmatt 3y ago
Its much better trying to appease 15 VCs than the entire trading world. Literally anyone rich enough can create a meaningful stake in your company and start disparaging you in public if they wanted to. Im sure there would be an army of short sellers lined up the moment OpenAI IPO'd in its current state In the current state no one has financial interest in spreading negative news about them
- vinnymac 3y ago
  > In the current state no one has financial interest in spreading negative news about them Perhaps not as much incentive, but considering the relationship between M$ and OpenAI, I expect many to have interests in spreading negative news.
ldjkfkdsjnv 3y ago
Its financially advantageous because public companies are judged far too much on their short term quarterly results. Going public these days is actually inferior to staying private for capital intensive long term businesses. OpenAI can lose money for another decade, and private investors will fund it.

hardware2win 3y ago

If this isnt going to end as a biggest investors trap, then ill be shocked

fakedang 3y ago
What is the biggest investors trap?

mrcwinn 3y ago

Elon Musk himself talks out of both sides of his mouth. He says public markets are the best way to ensure accountability and alignment. He also says to avoid, if possible, ever going public due to regulatory overhead. I suppose both can be true. It’s just a good reminder that when push comes to shove, special interest money would always prefer to serve fewer masters than more.

elorant 3y ago

Somewhere inside those 100B there’s probably a fab or two.

zug_zug 3y ago

This feels odd to me. I don't see how this can mathematically work out. I don't really see how AGI and capitalism coexist. Semes like a perverse incentive. I'm not sure if most billionaires (investors) deep down want to create a world where they are on an equal footing because money has lost all significance.

nojvek 3y ago

I hope OpenAI is going to build out custom chips. If you’re gonna raise that much money, better raise the petaflops/$/watt ceiling. It’d be very said if those billions went into GPT-5 with a tiny increment to GPT-4 capabilities. LLMs are also hyped. I hope we’re searching for newer architectures.

marstall 3y ago

I am confused because this seems like another case where the hype is orders of magnitude greater than any publicity about what this thing can actually do that is of wide usefulness, not just a fun toy to play around with. I'm think about the healthy energy flowing from the very beginning through, say, pc's, with enthusiasm for games, word processors, spreadsheets and compuserve spreading rapidly through the world.