8 ms·
No, they didn't raise $122B as the HN title implies. A big chunk of that $122B is a "maybe" that depends on various things that need to happen in the future. O
by simonebrunozzi 7mo ago
No, they didn't raise $122B as the HN title implies. A big chunk of that $122B is a "maybe" that depends on various things that need to happen in the future.
Oh, man... I can't wait to see where this is going. Might not be pretty after all.
- jredwards 7mo agoSeems like all of OpenAI's "deals" are announcement fodder with no real contract, primed to quietly fall through later.
- Aurornis 7mo agoHaving large funding rounds contingent on meeting milestones is common. Always has been.
- ares623 7mo agoThe assumption that's conveniently left out is that the milestones are realistic
- wmf 7mo agoWhy not announce the funding after the milestones have been met?
- apparent 7mo agoIt's splashier this way, and is meant to shape the narrative, make other companies fear their warchest, and make hiring easier. Of course, those who are in-the-know won't be fooled, but the perception of the general public will be set in stone by the PR framing.
- heyethan 7mo ago[flagged]
- Aurornis 7mo agoThe funds are committed under the terms of the deal (share price, things like board seats, and other details). There are legal obligations to provide it. This is a common structure for large investments. It would be really inefficient for all of these investors and companies to have to have the money sitting in cash to do a deal and then transfer it into the company's bank where it sits and earns interest for years until they can deploy it. Even VC firms who raise funds work this way. The capital is "committed" but investors don't wire all of the money over right away so it can sit in the VC firm's bank accounts, waiting. The VCs do what's called a "capital call" through which they're legally bound to provide the money they committed when requested, under the terms of the deal.
- jmalicki 7mo agoIt just makes comparing funding rounds hard to understand, since money in the bank is money in the bank, and a lot of the "committed capital if you reach a milestone" is capital that would be easy to get if you reached that milestone, if it is sufficiently advanced, and has enough outs, etc., that you may as well have just raised another round in the future.
- Aurornis 7mo agoThat’s logically inconsistent. If the company was performing poorly enough that they couldn’t meet their funding milestones from a previous round, they’re not going to have an easy time raising the same money in a future round. The milestones aren’t a hard-stop that forbids the previous funding round participants from providing the money if they still choose. It’s just an out.
- JohnMakin 7mo agosure they can. that's the whole point of the "pivot"
- jmalicki 7mo agoWhat I am saying is that if you do meet the milestones from your previous round, you're going to have an easy time fundraising anyway, so funding contingent on milestones isn't that different than just saying "well, if we need more money we can do another round"
- Aurornis 7mo agoFundraising rounds are difficult, laborious, and distracting. It would be extremely different to try to multiply the number of rounds by 3-5X. There's nothing easy about that. You're also ignoring that the market changes frequently. If you only raised as much money as you needed for the next 4-6 months with plans to re-raise all the time, you'd have to constantly be sizing your growth plans up or down based on how the market felt about startup investing that month. Imagine the company having to either do speed hiring or large layoffs every few months to adjust to the size of the fundraising round they were able to get this time around. Nothing about what you're suggesting would be easier, or easy at all
- ds2df 7mo ago[flagged]
- wesammikhail 7mo agoOne of the stipulations is that OpenAI achieves "AGI"... Need I say more? Also a lot of this "money" is in cloud compute and credits not cash so...
- caycep 7mo agothat being said, how can Softbank keep throwing around all these astronomical numbers after so many bad investments? Leftover iPhone money?
- Analemma_ 7mo agoSaudi oil money
- MidnightRider39 7mo agoWhich might not be a thing anymore soon the way things are going…
- bahmboo 7mo agoOther way around - the Saudis are making bank.
- outside1234 7mo agowell, until the Iranians blow up their refineries.
- saintfire 7mo agoIranians are also making bank. Why kick a hornets nest when you're winning?
- mschuster91 7mo ago> Why kick a hornets nest when you're winning? Tell that to Trump and his glorious way of bombing Iran. Nothing against the idea itself, the Mullahs all but asked for it to happen. But the execution? That was a level of dogshit I haven't seen in the time I was alive lol. Even Russia was better prepared with their invasion of Ukraine. Both Trump and Netanyahu had a somewhat solid perspective on not getting utterly wasted in the next elections. Instead they go on one of the most ill-prepared wars in modern history, with results that may seriously upend the global economy if not lead us to WW3 outright.
- troupo 7mo ago"Here comes another bubble..."
- JohnMakin 7mo agoDon't let reality get in the way of vibes
- dang 7mo agoOk, let's switch to the HTML doc title above.
- apparent 7mo agoI've wondered how many announced fundraising rounds were like this. It's in everyone's interest (VCs and entrepreneurs) if the message to the outside world is "this company is amazing so they've raised a boatload of cash". But VCs might not want to give it all up front, or unconditionally. It makes it hard to say what the valuation of a company is. If the milestones are unlikely to be hit, then it's anyone's guess.
- Aurornis 7mo agoThis is a common structure. It's confusing to people who don't know finance or startups when they first see it. Even VCs don't get all of their fund money delivered into their bank account when they raise a funding round. It's inefficient and undesirable for everyone involved to have to move all of the money up-front, at once. If you talk to anyone in startup funding or finance they'll be familiar with the term "capital call" which describes how committed capital obligations are delivered at a later date than the initial deal: https://en.wikipedia.org/wiki/Capital_call https://en.wikipedia.org/wiki/Capital_call
- johnebgd 7mo agoGotta hit that high IRR as a fund manager and the clock starts when the cash comes in so capital calls are appreciated by fund managers. Unless they are emerging managers (the startup equivalent in finance) and their LP’s are less than institutional and ghost them when the capital call hits.
- munk-a 7mo agoIRR is so trivial to manipulate - it'd be wonderful if more investors began demanding actual metrics on capital performance. If you're parking cash with an investment firm you want to know about how much of a return you can expect when it is withdrawn, and while history is a guide and not a guarantee, there are much better ways to inform that expected return than IRR. "My million got a return of 2% during a year when your reported IRR was 10% - where's the other 8%!" is a common cry from those who haven't just rolled over their investment, unaware of how little it has functionally appreciated.
- SilverElfin 7mo agoWith NASDAQ and NYSE looking to reduce the timelines for new public companies to be included into indices (“fast entry” rule), I have a feeling that OpenAI and SpaceX and Anthropic are mostly looking to dump their inflated shares into the public’s retirement accounts by force. Michael Burry called out this structural manipulation play recently: https://www.benzinga.com/markets/tech/26/03/51248353/michael-burry-flags-structural-manipulation-risk-in-nasdaq-rules-ahead-of-potential-spacex-listing https://www.benzinga.com/markets/tech/26/03/51248353/michael...
- singpolyma3 7mo agoRetirement accounts aren't required to buy a stick just because it's listed. ... probably will though
- SilverElfin 7mo agoRetirement accounts already own funds and those in turn are often tied to the underlying index. If the time to being included in an index is reduced, they end up being automatically bought sooner. And that keeps their price from collapsing artificially.
- figmert 7mo agoProbably again cancelled or significantly reduced in the near future when all the current investors inevitably cash out.
- zx8080 7mo ago> No, they didn't raise $122B as the HN title implies. What is this about? The title says "OpenAI closes funding round at an $852B valuation". It does not mention $122B. Edit: the linked page's title is different and indeed states $122B.
- satvikpendem 7mo agoMods on HN sometimes change the titles of submissions to be more neutral but they generally start off as the linked article's title, which is what the comment you're replying to was referring to.
- swiftcoder 7mo agoIt's also like... >$50 billion in compute credits and discounted hardware between Amazon/Microsoft/NVidia. Which is all inside baseball since they simultaneously juice their financials with OpenAI's cloud compute bill